FINRA Rule 2010 is a broad rule that prohibits members from engaging in any business-related conduct that is inconsistent with high standards of commercial honor and just and equitable principles of trade. The rule is designed to protect investors by ensuring that securities professionals act honestly and ethically in their dealings with customers.
The rule does not define what constitutes "high standards of commercial honor and just and equitable principles of trade." This is intentional, as the rule is meant to be interpreted broadly to cover a wide range of conduct. Some examples of conduct that could violate Rule 2010 include:
Churning, which is the excessive trading of a customer's account for the benefit of the broker rather than the customer.
Front-running, which is trading ahead of a customer's order to profit from the knowledge of the order.
Misappropriating customer funds or securities.
Making false or misleading statements to customers.
Failing to supervise employees properly.
Some additional things to know about FINRA Rule 2010 include:
The rule applies to all FINRA members, which can include broker-dealers, investment advisers, and investment bankers.
The rule applies to both intentional and unintentional misconduct.
The rule can be enforced even if the misconduct occurred outside of the United States.
If you you have been the victim of misconduct by a FINRA member, contact our law firm to discuss your legal options.