Question

A registered representative is a 15% participant in an investment club formed by members of the local Elks Club. The Elks Club investment club has opened a securities account at ABC Brokerage. The account wishes to buy an IPO being offered by an underwriter. Which statement is TRUE?

A. The account can buy the issue without restriction
B. The account can buy the issue if the branch manager approves
C. The account can buy the issue if the registered representative agrees not to share in the profit on the position
D. The account is prohibited from buying the new issue

Answer 1

D. The account is prohibited from buying the new issue.

Step-by-step explanation:

This account which is known to be owned by the registered representatives above are been put on probation or generally prohibited from purchasing new issues from its underwriters. Also it is known that for any account in whose name is been registered, its representatives or restricted persons have a greater than 10% participation as well. Therefore, there will be a prohibition in IPO purchase on such accounts. There are also other values that comes with IPO which includes the fact that it gives public awareness by making products been known by potential customers.