The Financial Industry Regulatory Authority (“FINRA”) has issued a regulatory notice addressing price volatility concerns associated with low-priced equity securities in customer margin and firm proprietary accounts. The notice advises that close attention be paid to low-priced equity securities; price volatility is usually associated with low-priced equities because they are inherently volatile. But what does FINRA consider a “low-price equity,” and what does it mean for you and your clients?

FINRA advises firms to weigh the risks that come with low-priced equity securities before extending credit in strategy-based or portfolio margin accounts. FINRA cautions firms to consider “volatility and concentrated positions in a single customer account and across all customer accounts, as well as the daily volume and market capitalization of each security when imposing ‘house’ maintenance margin requirements.”

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of FINRA-issued guidance in Advisor’s Journal, see Getting Your Feet Wet in the Social Media Market (CC 11-79) & SEC Says “Not So Fast” to Advisor Social Media Marketing (CC 11-40).

Tags: Business, Customer, Financial Industry Regulatory Authority, Investing, Investment Advisor, Social media, Social media marketing, U.S. Securities and Exchange Commission

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