FINRA Rule 2010 states that FINRA members must observe “high standards of commercial honor and just and equitable principles of trade” in the conduct of their business. If you think this rule seems broad, that’s because it is.
And unfortunately, FINRA members do not always live up to these high standards prescribed in FINRA Rule 2010.
So what do you do if your broker or financial advisor has failed to comply with its obligations under FINRA 2010?
Broker misconduct costs investors millions of dollars in investment losses each year. Such losses are often the result of fraud, misrepresentation, or negligent supervision of your account. While such misconduct can result in severe financial ramifications for you, fortunately there are avenues to hold these wrongdoers accountable.
If you suffered losses that you believe are a result of your broker failing to uphold the high standards of commercial honor and equitable principles of trade, contact The Law Offices of Robert Wayne Pearce, P.A.
Discuss your case with an experienced investment loss attorney as soon as possible to see how you may be able to recover.
Overview of Other Notable FINRA Rules
Typically, FINRA Rules outline the specific conduct prohibited by the rule itself. For example:
- FINRA Rule 1122 prohibits FINRA members and other individuals from filing membership or registration information with FINRA that contains incomplete or inaccurate information;
- FINRA Rule 2111 requires brokers to only recommend investments or investment strategies that are suitable for the client; and
- FINRA Rule 5270 prohibits the front running of block transactions.
So where does FINRA Rule 2010 come into play?
Oftentimes, investors utilize Rule 2010 to address misconduct not described in other FINRA rules. Rule 2010 operates as a catch-all provision to protect investors from financial negligence and other unethical practices by financial advisors and institutions.
What Does Rule 2010 Prohibit?
Rule 2010 sanctions brokers for bad faith or unethical “business-related” misconduct. Receiving a sanction under Rule 2010 does not necessarily mean the broker violated the law, even though a securities law violation on its own supports a finding that a broker violated Rule 2010.
Conduct deemed unethical or immoral, though not necessarily prohibited by law, authorizes discipline under the rule.
Business-Related Requirement
FINRA Rule 2010 mandates that the alleged misconduct be business-related to qualify for discipline under this rule. In a 2019 FINRA disciplinary action, a FINRA Hearing Panel explained that the relationship between the FINRA member’s unethical actions and the conduct of his or her securities business do not have to be closely connected.
Rather, the Panel implied that Rule 2010 extends to any misconduct that “reflects on the associated person’s capacity to comply with the regulatory requirements of the securities business and to fulfill [his or her] fiduciary duties in handling other people’s money.”
Examples of FINRA Rule 2010 Violations
Ultimately, every case alleging violation of Rule 2010 requires individual analysis to determine if the misconduct amounts to a violation of the rule.
To determine whether the rule was violated, evaluation of both the totality of the circumstances and the context of the misconduct is required. Remember, a Rule 2010 violation occurs even in circumstances when a broker does not commit a violation of state or federal law.
Actions considered a violation of Rule 2010 include:
- Misappropriating funds from clients or an employer;
- Sharing the confidential information of customers without approval;
- Forging signatures;
- Making alterations to important financial documents;
- Soliciting donations for personal benefit or other unauthorized uses;
- Misrepresenting financial information to customers; and
- Refusing to pay attorney fees and other expenses after initiating litigation against a customer.
Rule 2010 allegations arise frequently in conjunction with allegations that a broker violated another FINRA Rule.
Contact an Investment Loss Attorney to Answer Your Rule 2010 Questions
Arguably at the core of securities regulation is FINRA 2010. Without such a rule, FINRA members would have no overarching obligation to conduct their business with such high standards of honor and integrity.
Of course, even with Rule 2010 in place, FINRA members will inevitably fall short of these standards. When they do, know you can turn to The Law Offices of Robert Wayne Pearce, P.A.
With more than 40 years of experience representing investors and holding their brokers and financial advisors accountable for misconduct, you can be confident that our team has the knowledge and resources necessary to fight for you.
Attorney Robert Pearce has a strong record of success, recovering funds for more than 99% of his investor clients. To discuss your case and start the process toward compensation, contact us today for a free case evaluation.
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