FINRA Rule 2020 is also known as the "Use of Manipulative, Deceptive or Other Fraudulent Devices" rule. It prohibits FINRA member firms and their associated persons from engaging in any conduct that could be considered manipulative, deceptive, or fraudulent in connection with the purchase or sale of securities.
Key provisions of FINRA Rule 2020 include:
Prohibition on manipulative and deceptive devices: The rule broadly prohibits the use of any "manipulative, deceptive or other fraudulent device or contrivance" in connection with securities transactions. This includes, but is not limited to, making false or misleading statements, engaging in churning (excessive trading), and insider trading.
Duty of supervision: The rule also imposes a duty of supervision on member firms, requiring them to have adequate systems and procedures in place to prevent their associated persons from violating the rule.
Scienter requirement: The rule generally requires that a person act with "scienter" in order to be liable for a violation. This means that the person must have known or should have known that their conduct was manipulative, deceptive, or fraudulent.
FINRA Rule 2020 is a cornerstone of investor protection and helps to ensure that the securities markets are fair and efficient. It is important for all market participants to be aware of this rule and to comply with its provisions.
If a firm or induvial violated Rule 2020, conduct our law firm to discuss you available options.