Selling away
| Selling away |
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| See also |
Selling away happens when a broker proposes the client to buy:
- stock or
- obligations
which are not usually traded by his company. Such an offer is usually a violation of security regulations of the company. Most trading companies have their lists of traded securities. Before they are listed, they are:
- evaluated regarding to risk level,
- go through due diligence, etc.
Securities that are not on the list does not go through that process. Therefore, the risk of investment is not known. The selling away is not illegal. However, it happens in most cases when the client asks his broker about such securities. If he is informed that the risk cannot be assessed by the trading company and despite this, he wants to purchase such papers, the company can do this[1].
Reasons of selling away
Brokers can involve in selling away for a number of reasons. One of the reasons is that they are working for a smaller firm which does not carry a full assortment of products like the one the broker wishes to sell to you. The firm can not have:
- the resources and
- the due diligence capacity
to correctly evaluate and participate in the product, but nonetheless, the broker wants to sell it. Sometimes this takes part with insurance-based products which can have a securities component. For example, a variable annuity, where the broker has an individual insurance license to sell this kind of product because the firm does not possess an insurance division.
Selling away from certain items have to be always done with the guest's best interest in mind. It might never be done merely to steer guests away from inexpensive items. When you can not clearly substantiate your reason for the warning then your greed will be exposed. That should be merely done with items that were not right received by past guests. You have to show to the guest that you are going to support them with making a better decision[2].
Breaking down selling away
Selling away take places when the broker sells investments which are not the part of the products offered through their firm. At some times, the broker can do this because the client wants to buy a product that has not been yet approved through the broker's firm. The broker breaks the rules because they wish to earn a commission. This might frequently happen when the investments in question are placements of:
- private or
- other non-public investments.
Generally, selling away is an infringement of securities regulations[3].
Footnotes
References
- Bader W.R., (2013)., Securities Arbitration: Practice and Forms, Juris Publishing
- Brock D., (2019)., Monthly Membership Blueprint, Scribl
- Hayden D., (2011)., Tips2, Davide Hayden
- Khwaja, A. I., Mian, A. (2005)., Unchecked intermediaries: Price manipulation in an emerging stock market. Journal of Financial Economics, 78(1), 203-241.
- Lewins R.A., (2010)., How to keep from going broke with a broker: A guide to opening, maintaining and surviving your brokerage account, Hilcrest Publishing Group
Author: Klaudia Święs
