Page:United States Statutes at Large Volume 104 Part 1.djvu/988

 104 STAT. 954 PUBLIC LAW 101-429—OCT. 15, 1990 the purchase or sale of, any penny stock by any customer except in accordance with the requirements of this subsection and the rules and regulations prescribed under this subsection. "(2) RISK DISCLOSURE WITH RESPECT TO PENNY STOCKS. — Prior to effecting any transaction in any penny stock, a broker or dealer shall give the customer a risk disclosure document that— "(A) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; "(B) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to violations of such duties or other requirements of Federal securities laws; "(C) contains a brief, clear, narrative description of a dealer market, including 'bid' and 'ask' prices for penny stocks and the significance of the spread between the bid and ask prices; "(D) contains the toll free telephone number for inquiries on disciplinary actions established pursuant to section 15A(i) of this title; "(E) defines significant terms used in the disclosure document or in the conduct of trading in penny stocks; and "(F) contains such other information, and is in such form (including language, type size, and format), as the Commission shall require by rule or regulation. "(3) COMMISSION RULES RELATING TO DISCLOSURE. —The Commission shall adopt rules setting forth additional standards for the disclosure by brokers and dealers to customers of information concerning transactions in penny stocks. Such rules— "(A) shall require brokers and dealers to disclose to each customer, prior to effecting any transaction in, and at the time of confirming any transaction with respect to any penny stock, in accordance with such procedures and methods as the Commission may require consistent with the public interest and the protection of investors— "(i) the bid and ask prices for penny stock, or such other information as the Commission may, by rule, require to provide customers with more useful and reliable information relating to the price of such stock; "(ii) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and "(iii) the amount and a description of any compensation that the broker or dealer and the associated person thereof will receive or has received in connection with such transaction; "(B) shall require brokers and dealers to provide, to each customer whose account with the broker or dealer contains penny stocks, a monthly statement indicating the market value of the penny stocks in that account or indicating that the market value of such stock cannot be determined because of the unavailability of firm quotes; and "(C) may, as the Commission finds necessary or appropriate in the public interest or for the protection of investors, require brokers and dealers to disclose to customers

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