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Virginia Administrative Code (Last Updated: January 10, 2017) |
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Title 21. Securities and Retail Franchising |
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Agency 5. State Corporation Commission, Division of Securities and Retail Franchising |
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Chapter 20. Broker-Dealers, Broker-Dealer Agents and Agents of the Issuer |
Section 285. Customer notice for designated securities
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A. Broker-dealers that solicit the purchase and sale of designated securities shall provide the following notice to customers:
IMPORTANT CUSTOMER NOTICE-READ CAREFULLY
You have just entered into a solicited transaction involving a security which may not trade on an active national market. The following should help you understand this transaction and be better able to follow and protect your investment.
Q. What is meant by the BID and ASK price and the spread?
A. The BID is the price at which you could sell your securities at this time. The ASK is the price at which you bought. Both are noted on your confirmation. The difference between these prices is the "spread," which is also noted on the confirmation, in both a dollar amount and a percentage relative to the ASK price.
Q. How can I follow the price of my security?
A. For the most part, you are dependent on broker-dealers that trade in your security for all price information. You may be able to find a quote in the newspaper, but you should keep in mind that the quote you see will be for dealer-to-dealer transactions (essentially wholesale prices and will not necessarily be the prices at which you could buy or sell).
Q. How does the spread relate to my investments?
A. The spread represents the profit made by your broker-dealer and is the amount by which your investment must increase (the BID must rise) for you to break even. Generally, a greater spread indicates a higher risk.
Q. How do I compute the spread?
A. If you bought 100 shares at an ASK price of $1.00, you would pay $100 (100 shares X $1.00 = $100). If the BID price at the time you purchased your stock was $.50, you could sell the stock back to the broker-dealer for $50 (100 shares X $.50 = $50). In this example, if you sold at the BID price, you would suffer a loss of 50%.
Q. Can I sell at any time?
A. Maybe. Some securities are not easy to sell because there are few buyers, or because there are no broker-dealers who buy or sell them on a regular basis.
Q. Why did I receive this notice?
A. The laws of some states require your broker-dealer or sales agent to disclose the BID and ASK price on your confirmation and include this notice in some instances. If the BID and ASK were not explained to you at the time you discussed this investment with your broker, you may have further rights and remedies under both state and federal law.
Q. Where do I go if I have a problem?
A. If you cannot work the problem out with your broker-dealer, you may contact the Virginia State Corporation Commission or the securities commissioner in the state in which you reside, the United States Securities and Exchange Commission, or FINRA.
B. For the purpose of this section, the term "designated security" shall be defined under 21VAC5-20-280 D 13 c.
Historical Notes
Derived from Volume 29, Issue 20, eff. June 3, 2013; amended, Virginia Register Volume 31, Issue 08, eff. December 1, 2014.