DEFINITION of 'Anti-Reciprocal Rule'

A rule created by the Financial Industry Regulatory Authority (FINRA) to protect individual investors from conflicts of interest that may arise when brokerage firms and mutual funds collaborate.

BREAKING DOWN 'Anti-Reciprocal Rule'

The main violation the rule is designed to prevent is an arrangement between a brokerage firm and a mutual fund wherein the brokerage firm directs its clients to the mutual fund company (generating sales) and the mutual fund, in turn, sends its trades through the brokerage firm (generating commissions). Brokerage firms and mutual funds can be fined by FINRA (formerly the NASD) if there is proof that they have violated anti-reciprocal rules.

RELATED TERMS
  1. Brokerage Account

    An arrangement between an investor and a licensed brokerage firm ...
  2. Brokerage Company

    A business whose main responsibility is to be an intermediary ...
  3. No Transaction Fee Mutual Fund

    A mutual fund that is offered to investors by a brokerage firm ...
  4. Fund Supermarkets

    An investment firm or brokerage that offers investors a wide ...
  5. Financial Industry Regulatory Authority ...

    A regulatory body created after the merger of the National Association ...
  6. Payment For Order Flow

    The compensation and benefit a brokerage receives by directing ...
Related Articles
  1. Investing

    What's a Brokerage Account?

    A brokerage account is a contractual arrangement between an investor and a licensed securities broker or brokerage.
  2. Financial Advisor

    SEC's CARDS Plan Creates Controversy for Brokers

    The securities industry isn't happy with the hand it may be dealt with the SEC's proposed CARDS rules.
  3. Financial Advisor

    Mutual Funds: How Many is Too Many? (VTSMX, VBMFX)

    How many mutual funds are too many when it comes to a well diversified portfolio?
  4. Financial Advisor

    A Mutual Funds Guide for Young Investors

    Learn how mutual funds work, why they are so popular and how younger investors can get started by putting mutual funds in their IRAs or 401(k)s.
  5. Investing

    How Mutual Funds Differ Around The World

    Learn which country has the strictest rules on mutual fund construction and why.
  6. Investing

    4 Mistakes to Avoid When Choosing Mutual Funds to Invest in

    Mutual funds are a great way to build wealth but not all of them are the same. Investors have to be mindful of fees, turnover, redundancy and performance.
  7. Investing

    Savings Accounts Not Always The Best Place For Cash Assets

    Money market funds may be all that stands between you and increasing your wealth.
  8. Financial Advisor

    Expect FINRA to Ask These Culture Questions

    This month, FINRA kicks off its culture examinations for brokerage firms. Here's how to cram for the test.
  9. Investing

    How liquid are Fidelity mutual funds?

    Review the liquidity features of mutual fund shares and an overview of Fidelity mutual funds. Most investors look for convenient access to their investments.
  10. Investing

    Introduction To Money Market Mutual Funds

    Learn about the easiest way to benefit from money market securities.
RELATED FAQS
  1. How much of a company's stock can a mutual fund own?

    There is no written rule that stipulates how much of a company a mutual fund can own. Instead, there are two major factors ... Read Answer >>
  2. Is it a good idea to buy mutual funds from banks?

    Mutual funds offer consumers a great way to access a professionally-managed group of assets at a relatively low cost, with ... Read Answer >>
  3. If I am American, can I buy a foreign mutual fund?

    That depends. It is possible for you to buy a mutual fund issued in a country other than the United States; however, the ... Read Answer >>
  4. How can an investor profit from the increase in popularity of discount brokerages?

    Find out how investors benefit when brokerages compete with each other, and how discount brokerages are changing the market ... Read Answer >>
  5. When short selling a stock, how long does a short seller have before covering?

    There are no general rules regarding how long a short sale can last before being closed out. A short sale is a transaction ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center