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FINRA Conduct Rules & Sales Practice Violations

  1. What Rules Dictate How a Broker Must Act With a Customer?
  2. What Rules Must a Broker Follow When Communicating With the Public?
  3. What Are Sales Practice Violations?
  4. What Are Some Other Examples of Sales Practice Violations?
  5. What Should I Do if My Broker Has Breached FINRA’s Conduct Rules And/or Committed Sales Practice Violations?

What Rules Dictate How a Broker Must Act With a Customer?

Broadly speaking, FINRA Rule 2000 through Rule 3000 outline the standards that a broker must abide by when conducting business with a customer. The rules touch on communications with the public, sales practice violations, required disclosures to investors, and fair compensation for brokers.

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What Rules Must a Broker Follow When Communicating With the Public?

FINRA Rule 2210 controls the standards upon which a broker is held when communicating with the public. In pertinent part, the rule states that, “All member communications with the public shall be based on principles of fair dealing and good faith, must be fair and balanced, and must provide a sound basis for evaluating the facts…” FINRA has also enacted rules outlining the policies and procedures for the approval of marketing materials.

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What Are Sales Practice Violations?

A broker engages in a sales practice violation when he/she violates an applicable FINRA rule in the process of selling a security to a customer. Common violations include Best Interest deficiencies, unauthorized trading, breach of fiduciary duty, churning, and overconcentration.

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What Are Some Other Examples of Sales Practice Violations?

A broker engaging in high-pressure sales tactics would fall under the umbrella of sales practice violations. Likewise, a broker that makes outlandish remarks about a security to persuade a customer to invest also likely engaged in sales practice violations. A broker solely recommending high-commission or proprietary products to an investor would also be an example of a sales practice violation.

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What Should I Do if My Broker Has Breached FINRA’s Conduct Rules And/or Committed Sales Practice Violations?

If your portfolio has suffered losses due to conduct on the part of your broker, you should speak with an attorney at Malecki Law, one of New York’s leading Securities Law firms, to evaluate your claim and to determine if any of your losses could be recoverable through arbitration or litigation.

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