Ethical Practices and Prohibited Conduct
Core duties
An adviser owes a fiduciary duty; an agent owes a duty of fair dealing. Both translate into specific prohibitions: no misrepresentation or omission of a material fact, no unsuitable recommendations, no excessive trading or churning, no unauthorized transactions, no commingling of customer and firm assets, no guaranteeing a customer against loss, and no sharing in a customer's profits or losses without written consent and the firm's approval.
Conflicts and outside activity
Borrowing from or lending to customers is generally prohibited (narrow bank-lending and adviser exceptions exist). Selling away - private securities transactions outside the firm - and undisclosed outside business activities must be disclosed and approved. Referral compensation must be disclosed. Non-cash compensation and entertainment limits should be observed.
Manipulation and disclosure
Wash trades, matched orders, marking the close, and insider trading are prohibited. Using unearned titles such as "senior specialist" or implying special expertise is an unethical practice. High-pressure tactics and misleading seminar marketing - including free-meal seminars that conceal a sales purpose - are prohibited.
Traps
The anti-fraud provisions apply even when the security or transaction is exempt from registration, so "it was an exempt private placement" is never a defense. Discretion requires prior written authorization from the customer.
Worked example: An agent executes 40 trades in a small account over two months, generating commissions while the account loses value. The conduct is churning - a suitability and anti-fraud violation measured by turnover and cost-to-equity, not by the agent's intent.