Sales Activities - Other Prohibited Sales Practices

Selling Away -
this involves soliciting securities transactions and other financial products or services that are not offered or sponsored by the member firm.

Giving or Receiving Gifts Beyond the Allowable Amount - Gifts of more than $100 given to any member, associated person or employee of a member or associated person in relation to the business of the employer is prohibited.

Manipulative and Deceptive Devices
The following are prohibited sales practices that are considered manipulative and deceptive:

Forgery - A member may not falsely alter any written statement, including but not limited to signing a customer's name to any document or application.

Switching - A member may not move a customer's funds from one mutual fund family to another in order to generate additional commissions.

Borrowing From or Lending to Customers - The general rule is that borrowing between the registered representative and the customer is strictly forbidden. The only exception is a two-part one. First, the broker-dealer must have a written policy that permits such borrowing under specified conditions. Second, one of the following conditions must be met:

  • The customer must be a member of the representative's immediate family This is defined as: parents, grandparents, mothers-in-law or fathers-in-law, husbands or wives, brothers or sisters, brothers-in-law or sisters-in-law, sons-in law or daughters-in-law, children, grandchildren, cousins, aunts or uncles, or nieces or nephews, and also includes any other person whom the registered person supports, directly or indirectly, to a material extent.

  • The loan has been made on commercial terms that the customer generally makes available to members of the general public similarly situated as to need, purpose and creditworthiness

Commingling of Funds - A member may not combine a customer's funds or securities with their own. Also, they may not pledge a customer's funds or securities as joint collateral for a bank loan unless authorized in writing by the customer.

Insider Information - A member may not trade securities or make recommendations to trade based on material nonpublic information. Such insider information is discussed in more detail in the Communications With Prospective Customers section.

Selling Dividends - A member may not induce the sale of mutual funds by implying that a purchase just before a dividend or capital gain distribution is advantageous.

Guarantee Against Loss - A member may not state, imply, infer or guarantee that an investment account is guaranteed against loss. In fact, customers must be told that their investment funds are not insured, not guaranteed and may lose value.

Related Articles
  1. Active Trading

    FYI On ROI: A Guide To Calculating Return On Investment

    Return on investment is a simple equation that can give you an edge when fine-tuning your portfolio - here's how to use it.
  2. Investing

    How to Take Maternity Leave as a Freelancer

    Freelancers are not covered under the Family and Medical Leave Act, but maternity leave is still doable with these tips.
  3. Retirement

    Roth 401(k), 403(b): Which Is Right for You?

    Learn how to decide between a traditional or Roth version of the 401(k), 403(b) or 457(b) retirement plans to help you build your nest egg.
  4. Mutual Funds & ETFs

    Why ETFs Are a Smart Investment Choice for Millennials

    Exchange-traded funds offer an investment alternative to cost-conscious millennials who want to diversify their portfolios with less risk.
  5. Markets

    What Is the Labor Market Conditions Index?

    The Labor Market Conditions Index is a new Fed indicator to track labor statistics. How useful is it?
  6. Investing

    Asset Manager Ethics: Acting With Competence and Diligence

    Managers must make investment decisions based on their personal investment process, which in turn should be based on solid research and due diligence.
  7. Investing

    Asset Manager Ethics: Acting In the Benefit of Clients

    Investment managers should always act to benefit the client. Learn what actions managers should take on a client's behalf.
  8. Investing Basics

    Calculating The Present And Future Value Of Annuities

    Here's everything you need to account for when calculating the present and future value of annuities.
  9. Economics

    The World's Top 10 Economies

    A look at the top ten economies in the world.
  10. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  1. Percentage Change

    Percentage change is a simple mathematical concept that represents ...
  2. Horizontal Line

    A line that appears to proceed from left to right, or parallel ...
  3. Brand Identity

    Brand identity is the way a business wants consumers to perceive ...
  4. Elastic

    A situation in which the supply and demand for a good or service ...
  5. Earnings Stripping

    Earnings Stripping is a commonly-used tactic by multinationals ...
  6. Skinny Down Distribution

    Skinny down distribution is corporate practice of slimming down ...
  1. Is North Korea a developed country?

    North Korea is one of the poorest and least developed countries in the world. It is far from a developed country. Because ... Read Full Answer >>
  2. Does Netspend accept wire transfers?

    NetSpend accepts some types of wire transfers to add money to the prepaid debit cards it issues to its customers. There are ... Read Full Answer >>
  3. Is Mexico a developed country?

    As of 2015, Mexico is not a developed country. However, it beats the majority of its peers in the developing world on most ... Read Full Answer >>
  4. Is China a developed country?

    Despite having the world's second-largest economy and third-largest military, China is still, as of 2015, not classified ... Read Full Answer >>
  5. Do FHA loans require escrow accounts?

    Federal Housing Administration (FHA) loans require escrow accounts for property taxes, homeowners insurance and mortgage ... Read Full Answer >>
  6. Is Greece a developed country?

    Greece is a developed country by most meaningful metrics. However, its financial struggles have been well documented in the ... Read Full Answer >>
Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center