What disclosures are required when selling your brokerage firm's stock to clients?

When a brokerage firm sells its own stock to clients, the requirements for disclosure are aimed at ensuring transparency and protecting investor interests. The correct answer emphasizes the importance of making clients aware of potential conflicts of interest prior to the transaction taking place.

Specifically, oral disclosure before the transaction is required to inform clients about the nature of the transaction and any potential risks associated with buying stock from the firm that is selling it. This ensures that clients have an opportunity to ask questions and understand the implications of the purchase before committing.

Additionally, a written disclosure must be provided before settlement, which serves as a formal record of the information shared and can include important details such as the terms of the sale and any pertinent financial information about the brokerage firm. This dual-layer approach—both oral and written—ensures that clients are fully informed and can make decisions with complete awareness of any potential biases due to the firm's interest in selling its stock.

This combination of disclosures serves to uphold the ethical standards in the financial industry, enhancing trust and accountability between clients and their brokerage firms.