Series 6

AAA

FINRA Conduct Rules - Standards of Commercial Honor and Principles of Trade

General Sales Practices
Under FINRA General Standards of Business Conduct, a member, in the conduct of his or her business, must observe high standards of commercial honor and just and equitable principles of trade. Under Rule 2110, the following conduct is prohibited:

  • Front-running- The unethical practice of a member or associated person trading a security for their own account prior to entering an order for his or her client for the same security. The person who front runs an order is entering the order with the knowledge that their client is about to enter a large order that will move the price of the stock and are trying to profit from the knowledge of the order at the expense of the client.
  • Trading ahead of research reports - A member may not purposefully establish, create or change the firm's inventory position in a security in anticipation of the issuance of a research report by the member firm regarding that security. Any action taken based on the knowledge that the firm will be issuing a research report would be trading ahead and a violation
  • Trading ahead of customer orders (front running)- A member must make every effort to execute a customer market order fully and promptly. If any member accepts an order without immediately executing the order, that member is prohibited from trading the security on the same side of the market for its own account unless immediately thereafter, the member executes the customer market order up to the size and at the same or a better price than that at which it traded the security for its own account.

Members are also forbidden from using any manipulative, deceptive or other fraudulent devices in any dealings with the public under FINRA Rule 2120, which is cross referenced with SEC Rule 10b-5. This rule defines such behavior as the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange:

  • To employ any device, scheme or artifice to defraud
  • To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading
  • To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person in connection with the purchase or sale of any security.
Supervision
Related Articles
  1. Municipal Bond Tips For The Series 7 ...
    Insurance

    Municipal Bond Tips For The Series 7 ...

  2. 6 Proven Tips For Series 6 Success
    Retirement

    6 Proven Tips For Series 6 Success

  3. Tips For Passing The Series 6 Exam
    Insurance

    Tips For Passing The Series 6 Exam

  4. Banker Or Broker: Which Career Is Right ...
    Professionals

    Banker Or Broker: Which Career Is Right ...

  5. A Guide To Day Trading On Margin
    Active Trading Fundamentals

    A Guide To Day Trading On Margin

Trading Center