At times, your broker may restrict you from immediately purchasing one of our recommendations. This is due to their interpretation of what is called the “Safe Harbor Rule” under Rule 903 put forward by the Securities and Exchange Commission in 1998 as part of their role in regulating securities transactions. This is also referred to as the “40 day rule.” It specifically prohibits brokers from selling shares of U.S. companies that have been sold in other countries, such as Canada. However, customers are not prohibited from buying those shares. Even though you should be allowed to place an unsolicited bid, conservative brokers may interpret this ruling very strictly and prohibit the purchase of said shares until the 40 days have passed.

What can be done about this? Well, there are three primary courses of action. The first is to switch brokers; only certain brokers have this strict interpretation and the competition would love your business. Second, pressure you broker into reconsidering their ruling: email or write in explaining your frustration. Follow that up by following through on the first option which is to leave their service. Finally, your third choice is to wait the 40 days until the broker allows you to invest. The good news is that, though waiting is sub-optimal, often you are not going to miss out on the IPO price and the trade is still effective.


Category: Investing
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