Regulatory Requirements and Compliance
Fair dealing, distributions, and records
Compliance questions reward knowing which rule governs which fact pattern. Rule 2010 requires high standards of commercial honor; Rule 2020 prohibits manipulative devices; the antifraud provisions reach any material misstatement or omission in connection with a purchase or sale. Reg M restricts distribution activity: a distribution participant generally may not bid for or purchase the subject security during the restricted period, though passive market making in an NMS stock is permitted within Rule 103's limits. New issue rules split by customer type: Rule 5130 restricts allocations to industry insiders (associated persons, finders), while Rule 5131 addresses spinning, flipping, and quid pro quo allocations.
Resale restrictions live in Rule 144: for reporting issuers the holding period is six months, for non-reporting issuers one year, and affiliates must also satisfy the current public information, volume, manner-of-sale, and Form 144 filing conditions. Recommendations are governed by Regulation Best Interest for retail customers, with the care, disclosure, conflict-of-interest, and compliance obligations layered on top of FINRA suitability standards.
Books, records, and reporting obligations round this out: order and trade records, TRACE reporting, consolidated audit trail reporting, AML program requirements under FINRA Rule 3310 including suspicious activity reports, and cybersecurity and supervisory controls under Rule 3110.
Traps: applying Rule 5130 to a municipal official (that is 5131), confusing Rule 2010 with Rule 2020, and reciting Rule 144's volume limit as a fixed share count.
Rule of thumb: Rule 144 volume limit is the greater of 1% of the outstanding shares or the average weekly trading volume over the four calendar weeks preceding the Form 144 filing, per three-month period.