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CHANGE UNIT
Current Unit: UNIT 1: Regulation of Persons & Broker Dealers
Table of Contents
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Business Practices of BDs/Agents
- UNETHICAL
- Prohibited Practices
- Broker Dealer
- History of repeatedly delaying delivery of securities to customers
- Failing to disclose the firm is affiliated with the issuer of a recommended security
- Borrowing money from a client who is not in the lending business
- BDs holding securities for safekeeping
- Must segregate them from the firm's holdings
- Executing a transaction without authorization
- Sharing in profits/losses in customer account without written authorization of customer and BD
- Splitting commissions with agents of other BDs
- Disregarding customer complaints
- Recommending securities based on published press releases or non-public factual information
- Effecting transactions with no change in beneficial ownership
- BD conducting operations on premise of a financial institution
- Disclose investments being sold are not FDIC insured, may lose value
- Be physically distant where retail deposits are taken
- Obtain written acknowledgement customers have received disclaimers
- A broker-dealer with a A Radio spot of 30 secs or less does not require making disclosures in the advertisement
Business Practices of Investment Advisors/Representatives
- UNETHICAL
- A fee could be considered excessive if it were substantially higher than that charged by other investment advisers for performing similar services
- Misinforming client because of their age
- Placing orders for customer's account without having obtained written authorization from the client
- Placing orders on customer's account without authority to do so
- Sharing in profits/losses of customer's account
- ETHICAL
- IAs/IARs are allowed to lend money to employees of the same firm
- You are permitted to acknowledge someone as your client if someone asks, you cannot lie and say they are not.
- CUSTODIES OF SECURITIES/FUNDS
- Must quarterly statements to clients
- Must deposit client funds into one or more bank accounts, never COMMINGLED/MIXED with advisor funds
- Notify client in writing where funds are held.
- Must also arrange for an annual surprise audit
- Must notify administrator you have custody of client funds
- AGENT CROSS TRANSACTIONS
- Send written disclosure for Agent Cross Transactions ANNUALLY
- Send written disclosures of customer funds and securities (location and asset value) QUARTERLY
- Must have prior written acknowledgement and also disclosures, especially for a potential of conflict of interest
- CANNOT recommend transaction to both parties
Uniform Securities Act