Practice Quiz

FINRA Series 63 (NASAA)

Category - Series 63

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A client calls CanDo Broker-Dealers with a market-not-held order to buy 5,000 shares of China Security and Surveillance Technology, Inc. (CSR), which sells on the NYSE, “at a good price today.” The stock had opened at $5.13, traded as high as $5.36 during the day, and closed at $5.10. CanDo executed the purchase at a price of $5.31, so at market close, the client had lost $1,050. The client can
  1. sue CanDo for not getting him the best price of the day-or anything close to it.
  2. refuse to pay CanDo commissions for the purchase.
  3. refuse to pay for the stock on the settlement date.
  4. do nothing about it.
Explanation
Answer: D - If a client calls CanDo with a market-not-held order to buy 5,000 shares of CSR, he is leaving the price and timing of the trade to the broker’s discretion, and the broker cannot be held responsible if the price turns out not to be optimal after-the-fact. The client still owes CanDo its commissions, and to refuse to pay for the stock on the settlement date would subject the client to criminal penalties.
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