When is a broker-dealer allowed to accept payment for a new issue from a customer?

A broker-dealer is permitted to accept payment for a new issue from a customer once the registration becomes effective. This is because securities must be registered with the appropriate regulatory authority, such as the Securities and Exchange Commission (SEC), before they can be offered and sold to the public. The effectiveness of the registration statement marks the point in time when the securities can be sold and payments can be accepted.

Accepting payment before this point would be inappropriate as it could mislead investors into believing they are purchasing securities that are not yet officially available in the market, which could lead to compliance issues for the broker-dealer.

Receiving payment after an initial prospectus is issued or immediately upon application submission does not align with regulatory guidelines, as these situations occur either too early or without the necessary approval from the regulatory body. Similarly, waiting until the first shares are traded publicly is not practical for acceptance of payment, as it would delay the transaction process and the opportunity for investors to participate in the offering.