Fair Prices and Commissions
Chapters in this video
- 0:00 Why you cannot contract your way out of fair pricing
- 1:56 Agency versus principal transactions: the fairness standard applies to both
- 3:08 The 5% policy: guideline, not ceiling
- 5:35 The seven-factor analysis for evaluating fairness
- 7:36 The three biggest exam traps: disclosure, fixed percentages, and OTC-only scope
- 8:54 Rapid-fire recap
What this video covers
- Why mutual agreement between a broker-dealer and a customer does not make an unfair price legally acceptable
- How the fair pricing standard applies identically to agency transactions (commissions) and principal transactions (markups or markdowns)
- What the FINRA 5% policy actually is: a guideline, not a ceiling, and why charges below 5% can still be unfair while charges above 5% can sometimes be fair
- The seven factors regulators evaluate (type of security, availability, price, amount of money, disclosure, pattern of markups, and nature of the firm's business)
- Why disclosure alone is only one of seven factors and cannot cure an excessive markup or commission
- How fairness is never decided by a fixed percentage, and why exam answer choices relying on exact percentages are traps
- Why the fair pricing standard applies to all securities transactions with customers: listed, unlisted, and over the counter (OTC)
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