Series 7 Exam Question 307: Answer and Explanation

Question: 307

Which of the following is true regarding Penny Stock Disclosure Documents?

• A. They may be described orally prior to the customer's first transaction in penny stocks.
• B. They must be provided to the customer in written form prior to the customer's first transaction in penny stocks.
• C. They must be described orally and provided in written form prior to the customer's first transaction in penny stocks.
• D. The broker-dealer must provide a link to penny stock rules on their website prior to the confirmation sent to customers after the first transaction in penny stocks.

Correct Answer: A

Explanation:

A. Penny stock rules require that brokers must describe or mail out a penny stock disclosure document prior to the customer's first transaction in penny stocks. However, the customer must receive a written disclosure document by the time the customer receives a confirmation of the transaction.