Series 63 Tade Practices

Question 1

Suitability

Answer 1

-Information obtained from the customer with respect to their financial condition, investment objective, tolerance for risk, and investment experience

Actions violating suitability:

• Engaging in transactions solely to generate commissions (churning). with MFs, this is called switching
• Failing to disclose important facts concerning the risks of an investment
• Recommending a security without having reasonable basis for the recommendation, or without properly assessing the customer’s financial conditions, needs, or objectives
• Performing trades that is excessive in size in relation to the customer’s resources

Question 2

Market manipulation

Answer 2

Dissemination of information designed to cause the rise or fall of security prices

Question 3

Other prohibited practices

Answer 3

• Borrowing money or security from a client or from a client’s account
• Exercising discretion in a customer’s account without written authorization from the customer. A trade is discretionary if the B/D decide on the type or size of the security; it is not discretionary if the B/D decide on the price and time
• Commingling customer funds with agent funds or funds of the B/D
• sharing in the profits or losses and a customer’s account, unless the agent has written consent from the customer ad B/D and the sharing is directly proportionate to the funds invested by each party involved
• Knowingly or deliberately failing to follow a customer’s instructions
• Affecting trades in a customer’s account without specific authorization from the customer, or accepting orders from a third-party without having a written third-party trading authorization from the customer
• Guaranteeing a customer’s account against loss, or guaranteeing a minimum rate of return or specific dollar profit on any investment
• Affecting private transactions with customers not recorded on the books of the B/D known as selling away
• Soliciting orders for nonexempt unregistered securities
• Participating in manipulative market activities, which give the misleading appearance of trading activity in a security, such as wash trades and matched orders
• Participating in securities transactions only to give the appearance of increased trading known as painting the tape
• Failing to notify a customer of larger than ordinary commissions or costs
• Disclosing information about an account to someone other than the customer without the customer’s authorization