Conquer FINRA 2025 – Elevate Your Financial Future with Confidence!

Question: 1 / 400

Which action is not required before effecting an initial penny stock transaction for a new customer?

Confirm whether the person is an established customer.

Obtain a signed risk disclosure document from the customer.

Obtain a signed suitability statement from the customer.

Confirm that a margin account has been established.

The action of confirming that a margin account has been established is not required before effecting an initial penny stock transaction for a new customer. When dealing with penny stocks, regulatory guidelines do emphasize the importance of ensuring a customer understands the risks involved, which includes obtaining a signed risk disclosure document and a signed suitability statement. These measures help to protect inexperienced investors by ensuring they are aware of the specialized risks associated with trading penny stocks.

On the other hand, the requirement for a margin account does not apply specifically to penny stock transactions. Many investors can have cash accounts for such trades, and it is not a prerequisite for conducting an initial transaction in penny stocks. Therefore, confirming that a margin account exists is not necessary under the regulations governing penny stocks.

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