Legal Definitions - parking

Definition: Parking refers to the sale of securities with an agreement to buy them back at a later time for a similar price. This practice is illegal if done to evade securities regulations or tax laws. It is often used to avoid the net-capital requirements of the National Association of Securities Dealers (NASD) by brokerage firms.

Example: A brokerage firm sells stock from its own account to a customer at market price to avoid the discount for reporting purposes. After filing its report, the firm buys back the shares from the customer at the same price plus interest. This allows the firm to reach technical compliance with the NASD's net-capital requirements.

Another example: An individual places their assets in a safe, short-term investment while considering other investment opportunities. This is also known as stock-parking.

Explanation: The examples illustrate how parking can be used to circumvent regulations or requirements. In the first example, the brokerage firm uses parking to avoid the discount for reporting purposes and comply with the NASD's net-capital requirements. In the second example, an individual uses parking as a temporary investment strategy while considering other options.