General Securities Sales Supervisor (Series 10) Practice Exam 2025 - Free Series 10 Practice Questions and Study Guide

Under FINRA Rule 5130, registered representatives are prohibited from purchasing new issue stock under any circumstances that involve certain conflicts of interest. This rule is designed to prevent the appearance of impropriety and to maintain fair access to new issue securities. The main concern is that allowing registered representatives to purchase new issue stock could create a conflict between their responsibilities as brokers and their interests as investors, potentially leading to unfair advantages.

This rule particularly addresses the practice where insiders of broker-dealers may benefit at the expense of retail investors, who might have been waiting for the opportunity to invest in these new issues. Thus, regardless of principal approval, issue pricing, or investor classification, the rule creates a blanket prohibition to uphold market integrity.

The other choices highlight scenarios that do not align with the strict limitations placed by the rule, reinforcing the broad scope of prohibition it encompasses.