Antifraud Provisions

  • Complaints and Your Compliance Officer
    If a customer brings forth a formal complaint, you must bring the complaint to the attention of your compliance officer, and/or broker-dealer.

  • Guarantees
    It is considered fraudulent to guarantee any returns to any client.

  • Commingling funds
    It is considered fraudulent to commingle funds in an account, unless:
    • written authorization is granted by the firm.
    • an agent contributes equally (monetarily) to the account.

  • Profit sharing
    It is considered fraudulent to share in the profits of a client's account - unless the account is dually owned with proportionate funds. Furthermore, if an account is proportionately owned, written notice must be supplied (and approved) by the broker-dealer.

Antifraud is always hot topic with the FINRA, especially with regards to Anti-money laundering. exam.

Market Manipulation

  • Front running
    Front running is an unethical practice that occurs when a broker trades equity based on information from the analyst department before his or her clients have been given the information.

  • Tailgating
    Tailgating occurs when a broker or advisor is purchasing or selling a security for his or her client(s), and then immediately making the same transaction in his or her own account.

  • Painting the tape
    Painting the tape is an illegal action that occurs when a group of market manipulators are buying and/or selling a security among themselves to create artificial trading activity, which, when reported on the ticker tape, lures unsuspecting investors as they perceive an unusual volume.This behavior is similar to matching orders.

Fiduciary Duties

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