17 CFR 240.15g-9 - Sales practice requirements for certain low-priced securities.

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§ 240.15g-9 Sales practice requirements for certain low-priced securities.

(a) As a means reasonably designed to prevent fraudulent, deceptive, or manipulative acts or practices, it shall be unlawful for a broker or dealer to sell a penny stock to, or to effect the purchase of a penny stock by, any person unless:

(1) The transaction is exempt under paragraph (c) of this section; or

(2) Prior to the transaction:

(i) The broker or dealer has approved the person's account for transactions in penny stocks in accordance with the procedures set forth in paragraph (b) of this section; and

(ii)

(A) The broker or dealer has received from the person an agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased; and

(B) Regardless of the form of agreement used to satisfy the requirements of paragraph (a)(2)(ii)(A) of this section, it shall be unlawful for such broker or dealer to sell a penny stock to, or to effect the purchase of a penny stock by, for or with the account of a customer less than two business days after the broker or dealer sends such agreement.

(b) In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

(1) Obtain from the person information concerning the person's financial situation, investment experience, and investment objectives;

(2) Reasonably determine, based on the information required by paragraph (b)(1) of this section and any other information known by the broker-dealer, that transactions in penny stocks are suitable for the person, and that the person (or the person's independent adviser in these transactions) has sufficient knowledge and experience in financial matters that the person (or the person's independent adviser in these transactions) reasonably may be expected to be capable of evaluating the risks of transactions in penny stocks;

(3) Deliver to the person a written statement:

(i) Setting forth the basis on which the broker or dealer made the determination required by paragraph (b)(2) of this section;

(ii) Stating in a highlighted format that it is unlawful for the broker or dealer to effect a transaction in a penny stock subject to the provisions of paragraph (a)(2) of this section unless the broker or dealer has received, prior to the transaction, a written agreement to the transaction from the person; and

(iii) Stating in a highlighted format immediately preceding the customer signature line that:

(A) The broker or dealer is required by this section to provide the person with the written statement; and

(B) The person should not sign and return the written statement to the broker or dealer if it does not accurately reflect the person's financial situation, investment experience, and investment objectives; and

(4)

(i) Obtain from the person a signed and dated copy of the statement required by paragraph (b)(3) of this section; and

(ii) Regardless of the form of statement used to satisfy the requirements of paragraph (b)(4)(i) of this section, it shall be unlawful for such broker or dealer to sell a penny stock to, or to effect the purchase of a penny stock by, for or with the account of a customer less than two business days after the broker or dealer sends such statement.

(c) For purposes of this section, the following transactions shall be exempt:

(1) Transactions that are exempt under 17 CFR 240.15g-1 (a), (b), (d), (e), and (f).

(2) Transactions that meet the requirements of 17 CFR 230.505 or 230.506 (including, where applicable, the requirements of 17 CFR 230.501 through 230.503, and 17 CFR 230.507 through 230.508), or transactions with an issuer not involving any public offering pursuant to section 4(2) of the Securities Act of 1933.

(3) Transactions in which the purchaser is an established customer of the broker or dealer.

(d) For purposes of this section:

(1) The term penny stock shall have the same meaning as in 17 CFR 240.3a51-1.

(2) The term established customer shall mean any person for whom the broker or dealer, or a clearing broker on behalf of such broker or dealer, carries an account, and who in such account:

(i) Has effected a securities transaction, or made a deposit of funds or securities, more than one year previously; or

(ii) Has made three purchases of penny stocks that occurred on separate days and involved different issuers.

[54 FR 35481, Aug. 28, 1989. Redesignated and amended at 58 FR 37417, July 12, 1993; 70 FR 40632, July 13, 2005]

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

This list is taken from the Parallel Table of Authorities and Rules provided by GPO [Government Printing Office].

It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly. More limitations on accuracy are described at the GPO site.


United States Code
U.S. Code: Title 7 - AGRICULTURE
U.S. Code: Title 12 - BANKS AND BANKING
U.S. Code: Title 15 - COMMERCE AND TRADE

§ 27dd

§ 77c - Classes of securities under this subchapter

§ 77d - Exempted transactions

§ 77g - Information required in registration statement

§ 77j - Information required in prospectus

§ 77s - Special powers of Commission

§ 77z-2

§ 77z-3

§ 77eee - Securities required to be registered under Securities Act

§ 77ggg - Qualification of indentures covering securities not required to be registered

§ 77nnn - Reports by obligor; evidence of compliance with indenture provisions

§ 77sss - Rules, regulations, and orders

§ 77ttt - Hearings by Commission

§ 78c - Definitions and application

§ 78c-3

§ 78c-5

§ 78d - Securities and Exchange Commission

§ 78e - Transactions on unregistered exchanges

§ 78f - National securities exchanges

§ 78g - Margin requirements

§ 78i - Manipulation of security prices

§ 78j - Manipulative and deceptive devices

§ 78j-1

§ 78k - Trading by members of exchanges, brokers, and dealers

§ 78k-1

§ 78l - Registration requirements for securities

§ 78m - Periodical and other reports

§ 78n - Proxies

§ 78o - Registration and regulation of brokers and dealers

§ 78o-4

§ 78o-10

§ 78p - Directors, officers, and principal stockholders

§ 78q - Records and reports

§ 78q-1

§ 78s - Registration, responsibilities, and oversight of self-regulatory organizations

§ 78u-5

§ 78w - Rules, regulations, and orders; annual reports

§ 78x - Public availability of information

§ 78ll - Requirements for the EDGAR system

§ 78mm - General exemptive authority

§ 80a-20

§ 80a-23

§ 80a-29

§ 80a-37

§ 80b-3

§ 80b-4

§ 80b-11

§ 7201 - Definitions

§ 7202 - Commission rules and enforcement

§ 8302 - Review of regulatory authority

U.S. Code: Title 18 - CRIMES AND CRIMINAL PROCEDURE
Statutes at Large

Title 17 published on 2015-04-01

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 17 CFR Part 240 after this date.

  • 2015-11-16; vol. 80 # 220 - Monday, November 16, 2015
    1. 80 FR 71388 - Crowdfunding
      GPO FDSys XML | Text
      SECURITIES AND EXCHANGE COMMISSION
      Final rule.
      The final rules and forms are effective May 16, 2016, except that instruction 3 adding part 227 and instruction 15 amending Form ID are effective January 29, 2016.
      17 CFR Parts 200, 227, 232, 239, 240, 249, 269, and 274