Under IIROC Rule 3300, how should dealers price OTC securities?

Under IIROC Rule 3300, how should dealers price OTC securities?

• A. At inflated values to increase profit margins
• B. Fairly
• C. Only based on client demand
• D. At values agreed upon by the dealer and client, regardless of market

Answer: (B)

Under IIROC Rule 3300, dealers are required to price over-the-counter (OTC) securities fairly. This principle ensures that transactions are conducted in a manner that is fair to all parties involved, particularly the clients. Fair pricing is crucial for maintaining integrity and trust in the financial markets, as it prohibits manipulative practices that could mislead or disadvantage investors.

Fair pricing means taking into account the market conditions, comparable transactions, and the inherent value of the securities rather than relying on arbitrary or inflated pricing strategies. This approach helps to protect investors and fosters a transparent trading environment.

The other options present practices that may undermine market integrity. Inflating values undermines the concept of fair dealing and could lead to regulatory scrutiny. Pricing only based on client demand disregards the necessary market context and can lead to volatility. Lastly, pricing based solely on the agreement between dealer and client, regardless of market values, can result in unfair practices that do not reflect the realistic value of the securities. Therefore, fair pricing stands out as the appropriate and ethical approach as mandated by IIROC Rule 3300.