Professional Conduct and Ethical Considerations
Conduct rules are tested through scenarios
Most ethics questions are short fact patterns asking whether a registered representative's proposed action is permitted. Build a checklist: Is it honest and in the customer's best interest? Is it disclosed and approved in writing? Is it recorded?
The standards layer on one another. FINRA Rule 2010 requires high standards of commercial honor and just and equitable trade practices; Rule 2020 prohibits manipulative devices. Rule 2111 (suitability) and Reg BI (best interest) overlap - Reg BI adds Care, Disclosure, Conflict of Interest, and Compliance obligations for retail recommendations and sets a higher bar than suitability, but it does not create an Advisers Act fiduciary duty. Rule 2210 governs communications and principal pre-approval.
Know the numeric lines. Rule 3220 caps gifts and gratuities at $100 per person per year; Rule 2030's de minimis pay-to-play contribution is $350 per election per candidate; a Currency Transaction Report is triggered by more than $10,000 in cash in one business day, while a Suspicious Activity Report has a $5,000 threshold and may never be disclosed to the customer. Outside business activities (Rule 3270) and private securities transactions (Rule 3280) both require prior written notice; selling away without approval is a serious violation.
Traps: treating the gift limit as per gift rather than per year; assuming a client's oral permission suffices for an outside activity; telling a customer a SAR was filed; and reading Reg BI as banning all conflicts rather than requiring mitigation and disclosure.
Worked example: a rep sends a client's trader a $60 gift card in March and another $60 voucher in November. The $120 total exceeds the $100 annual limit, so the second gift breaches Rule 3220 even though each gift alone is under $100.
Rule of thumb: if it isn't documented and pre-approved, assume it isn't permitted.