General Securities Sales Supervisor (Series10) Practice Exam

Under Rule 144, solicitation of orders to buy stock is generally prohibited, except in which circumstance?

1. When the buyer is a corporation

2. When the buyer is a financial institution

3. When interest is unsolicited and indicated within a specific timeframe

4. When the stock has been held for less than one year

The correct answer is: When interest is unsolicited and indicated within a specific timeframe

Under Rule 144, which provides a safe harbor for the resale of restricted and control securities, the solicitation of orders is generally restricted to prevent market manipulation and ensure that the sale of securities is conducted fairly and transparently. However, there is an exception when interest is unsolicited and indicated within a specific timeframe. This allows for a situation where a seller may respond to a buyer’s genuine interest without actively soliciting sales, which could otherwise lead to potential abuses and artificial inflation of stock prices. In this context, unsolicited interest refers to situations where a buyer expresses interest on their own initiative without being prompted by marketing or solicitation efforts from the seller or any third party. The specific timeframe aspect reinforces that there is a structured and legitimate basis for the interest, adhering to regulatory requirements. This exception acknowledges the reality of market dynamics where spontaneous buyer interest can occur independently of any solicitation, ensuring that genuine market activities can proceed without infringing on regulatory safeguards while also protecting the seller’s rights to respond to potential buyers.