FINRA Practice Exam 2025 – Complete Prep Guide

A broker-dealer is permitted to accept payment for a new issue from a new customer only when the registration is effective. This means that the securities have been formally registered with the relevant regulatory authority, such as the SEC, and are ready to be sold to the public. Until the registration becomes effective, the broker-dealer cannot legally collect payment for the securities since they cannot offer or sell the securities during that time.

Registration indicates that all necessary disclosures have been made and the security is approved for sale, ensuring that investors have access to all required information to make an informed decision. This is a critical aspect of regulatory compliance designed to protect investors and maintain market integrity.

The other options refer to stages in the registration process, such as the distribution of a preliminary prospectus or a Red herring, which are important for communication with potential investors but do not authorize the acceptance of payment. The cooling-off period is primarily a time for regulatory review and marketing materials, during which no payments can be accepted either.