Sales Activities - FINRA Conduct Rule 2420
Dealing with Non-Members
This rule requires that representatives deal with any non-member (someone not affiliated with a broker-dealer) the same as they would anyone in the general public. In essence, a representative cannot offer a discount or share commissions with anyone who is not affiliated with a broker-dealer. This includes the purchase or sale of any security on any terms other than those available to anyone else. Activities prohibited under this rule include:
- Allowing or granting to any non-member broker or dealer any selling concession, discount or other allowance allowed by such member to a member of a registered securities association and not allowed to a member of the general public, in any transaction with such non-member broker or dealer.
Joining with any non-member broker or dealer in any syndicate or group contemplating the distribution to the public of any issue of securities
- Selling any security to or buying any security from a non-member broker or dealer except at the same price at which, at the time of such transaction, such member would buy or sell such security, from or to a person who is a member of the general public not engaged in the investment banking or securities business
For the purpose of this rule, the term "non-member broker or dealer" shall include any broker or dealer who makes use of the mails or of any means or instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of any security, otherwise than on a national securities exchange, who is not a member of any securities association registered with the Commission pursuant to Section 15A of the act, except a broker or dealer who deals exclusively in commercial paper, bankers' acceptances or commercial bills. This rule does not apply to any non-member broker or dealer in a foreign country who is not eligible for membership in a registered securities association.
Exam Tips and Tricks
Be sure to know that members cannot offer a better price on a security to a nonmember firm than to anyone in the general public.