Series 66

Conflicts of Interest - Antifraud Provisions and Market Manipulation

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.



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