Investing Resources

Avoiding Scams

According to FINRA, what types of conduct within the securities industry are unacceptable?

While there are many rules that regulate and govern the securities industry, FINRA states explicitly that certain acts are prohibited, as they may indicate the existence of some form of fraud or abuse. These prohibited acts include: making unsuitable recommendations to an investor, given his age, financial background, objectives, and experience; trading securities in a client’s account without being authorized to do so; switching a client from one mutual fund into another for no legitimate purpose; misrepresenting an investment; providing false information about an investment; taking funds from a client’s account without his permission; charging excessive fees and commissions to clients; guaranteeing clients that they will not lose money on an investment; doing special deals or transactions without the brokerage firm’s knowledge; failure to display limit orders by market makers; failure to be diligent in assuring that an order is executed at the best possible price; buying or selling securities while possessing non-public (inside) information; and manipulating, deceiving, or misleading the investor to effect the purchase or sale of a security.



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