Regulation & Professional Duty
Who regulates whom, which standard of care applies, and what gets an advisor barred.
16 terms in this unit.
Fiduciary Duty
A legal obligation to act in the client's best interest.
Suitability Standard
A recommendation must be appropriate given the client's profile.
Regulation Best Interest (Reg BI)
SEC rule requiring broker-dealers to act in a retail client's best interest.
Registered Investment Adviser (RIA)
A firm registered to give advice for a fee, holding fiduciary duty.
Broker-Dealer
A firm that executes trades as agent (broker) or principal (dealer).
FINRA
The self-regulatory organization overseeing broker-dealers.
Securities and Exchange Commission (SEC)
The federal agency regulating securities markets.
SIPC
Insurance against broker failure - not against investment losses.
Securities Act of 1933
The 'truth in securities' law governing new issues.
Securities Exchange Act of 1934
Governs secondary-market trading and created the SEC.
Investment Advisers Act of 1940
Defines who is an investment adviser and imposes fiduciary duty.
Form ADV
The RIA's registration and disclosure document.
Churning
Excessive trading in a client account to generate commissions.
Insider Trading
Trading on material non-public information in breach of a duty.
Front Running
Trading ahead of a known client order to profit from its price impact.
Know Your Customer (KYC)
The obligation to gather and use essential facts about each client.