SIE (Securities Industry Essentials) Practice Exam

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What does the so-called 5% policy pertain to?

Mark ups on retail OTC transactions excepting new issues
Discounts on bulk transactions
Dividend payout ratios
Capital gains tax

The correct answer is: Mark ups on retail OTC transactions excepting new issues

This policy is in relation to the 5% mark up that can be charged on retail over-the-counter (OTC) transactions, with the exception of new issues. This means that for any OTC transaction, a maximum of 5% can be added to the original price for markup. Option B is incorrect because it talks about discounts, which would not be allowed under this policy. Option C is incorrect because it discusses dividend payout ratios, which are unrelated to markups on retail OTC transactions. Option D is incorrect because it mentions capital gains tax, which is a different concept altogether.