I will take a swing: The rule itself is true interms of guidance. But not for the reasons that are stated in your post (Although entirely possible). IA's act on behalf of people who would not otherwise know the intracacies of this area of the market. This is a risk Management issue. All IA's have a Fiduciary responsibility to act on behalf of their client. Although the 1$/share is a rule of thumb there are other measurements used to provide guidance such as historical performance and current performance in revenues, earnings or Market cap. Again the focus is Risk and risk management on behalf of an unknowing public. the measurements are set internally which is why some would allow invement is say SIRI, FNMA, FHLMC in the market dump a couple of years ago. As a business, it woudl stink if you built a reputation placing your clients in higher risk companies where the unknowong public would lose money... They would rather focus more on captial preservation and return on that capital.