Appendix B – Dishonest or Unethical Business Practices of Broker-Dealers and Agents
[Adopted May 23, 1983]
Appendix B: Dishonest or Unethical Business Practices of Broker-Dealers and Agents
[HIGH STANDARDS AND JUST PRINCIPLES.] Each broker-dealer and agent shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business. Acts and practices, including but not limited to the following, are considered contrary to such standards and may constitute grounds for denial, suspension or revocation of registration or such other action authorized by statute.
1. BROKER-DEALERS
a. Engaging in a pattern of unreasonable and unjustifiable delays in the delivery of securities purchased by any of its customers and/or in the payment upon request of free credit balances reflecting completed transactions of any of its customers;
b. Inducing trading in a customer’s account which is excessive in size or frequency in view of the financial resources and character of the account;
c. Recommending to a customer the purchase, sale or exchange of any security without reasonable grounds to believe that such transaction or recommendation is suitable for the customer based upon reasonable inquiry concerning the customer’s investment objectives, financial situation and needs, and any other relevant information known by the broker-dealer;
d. Executing a transaction on behalf of a customer without authorization to do so;
e. Exercising any discretionary power in effecting a transaction for a customer’s account without first obtaining written discretionary authority from the customer, unless the discretionary power relates solely to the time and/or price for the executing of orders;
f. Executing any transaction in a margin account without securing from the customer a properly executed written margin agreement promptly after the initial transaction in the account;
g. Failing to segreg