Standards of Conduct

Standards of Conduct. Each broker-dealer and agent shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business. Acts, conduct, and practices, including, but not limited to, the following are considered contrary to such standards and may constitute grounds for denial, suspension, or revocation of registration, imposition of fines, a bar, or such other action authorized by statute. A. Broker-dealers. 1. Causing any unreasonable delays in the placement of orders, execution of orders, or the delivery of securities purchased by any of its customers or in the payment upon request of free credit balances reflecting completed transactions of any of its customers. 2. Inducing trading in a customer's account that is excessive in size or frequency in view of the financial resources, investment objectives of the customer, and character of the account. 3. Recommending to a customer the purchase, sale, or exchange of any security without reasonable grounds to believe that such transaction or recommendation is suitable for the customer based upon reasonable inquiry concerning the customer's investment objectives, age, financial situation, risk tolerance, needs, and any other relevant information known by the broker-dealer. 4. Executing a transaction on behalf of a customer without authorization to do so. 5. Marking any order tickets or confirmations as unsolicited when in fact the transaction is solicited. 6. Exercising any discretionary power in effecting a transaction for a customer's account without first obtaining written discretionary authority from the customer, unless the discretionary power relates solely to the time and/or price for the execution of orders. 7. Extending, arranging for, or participating in arranging for credit to a customer in violation of the Securities Exchange Act of 1934 or the regulations of the Federal Reserve Board. 8. Executing any transaction in a margin account without obtaining from the customer a properly executed written margin agreement prior to the settlement date for the initial transaction in the account. 9. Failing to segregate customers' free securities or securities held in safekeeping. 10. Hypothecating a customer's securities without having a lien thereon unless written consent is first obtained, except as permitted by rules of the SEC. 11. Entering into a transaction with or for a customer at a price not reasonably related to the current market price of the security or receiving an unreasonable commission or profit. 12. Failing to furnish to a customer purchasing securities in an offering, no later than the date of confirmation of the transaction, either a final prospectus or a preliminary prospectus and an additional document, which together includes all information set forth in the final prospectus. 13. Charging unreasonable and inequitable fees for services performed, including miscellaneous services such as collection of monies due for principal, dividends, or interest; exchange or transfer of securities; appraisals, safekeeping, or custody of securities; and other services related to its securities business, except where such fees are negotiated or have been previously consented to by the customer. 14. Offering to buy from or sell to any person any security at a stated price unless such broker-dealer is prepared to purchase or sell, as the case may be, at such price and under such conditions as are stated at the time of such offer to buy or sell. 15. Representing that a security is being offered to a customer “at the market” or a price relevant to the market price, unless such broker-dealer knows or has reasonable grounds to believe that a market for such security exists other than that made, created, or controlled by such broker-dealer, or by any person for whom he is associated in such distribution, or any person controlled by, controlling, or under common control with such broker-dealer. 16. Effecting any transaction in or inducing the purchase or sale of any security by means of any manipulative, deceptive, or fraudulent device, practice, plan, program, design, or contrivance which may include, but not be limited to: a. Effecting any transaction in a security which involves no change in the beneficial ownership thereof; b. Entering an order or orders for the purchase or sale of any security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and for substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties for the purpose of creating a false or misleading appearance of active trading in the security or a false or misleading appearance with respect to the market for the security; however, nothing in this Subsection shall prohibit a broker-dealer from entering bona fide agency cross transactions for its customers; c. Effecting, alone or with one or more other persons, a series of transactions in any security creating actual or apparent active trading in such security or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others; d. Contradicting or negating the importance of any information contained in a prospectus or other offering materials with intent to deceive or mislead, or using any advertising or sales presentation in a deceptive or misleading manner; e. In connection with the offer, sale, or purchase of a security, falsely leading a customer to believe that the broker-dealer or agent is in possession of material, nonpublic information which would impact the value of the security; f. In connection with the solicitation of a sale or purchase of a security, engaging in a pattern or practice of making contradictory recommendations to different investors with similar investment objectives for some to sell and others to purchase the same security, at or about the same time, when not justified by the particular circumstance of each investor. 17. Guaranteeing a customer against loss in any securities account of such customer carried by the broker-dealer or in any securities transaction effected by the broker- dealer with or for such customer. 18. Publishing, circulating, or causing to be published or circulated any notice, circular, advertisement, newspaper article, investment service, or communication of any kind which purports to report any transaction as a purchase or sale of any security unless such broker-dealer believes that such transaction was a bona fide purchase or sale of such security; or which purports to quote the bid price or asked price of any security, unless such broker-dealer believes that such quotation represents a bona fide bid for, or offer of, such security. 19. Using any advertising or sales presentation in such a fashion as to be deceptive or misleading. An example of such practice would be distribution of any nonfactual data, material, or presentation based on conjecture; unfounded or unrealistic claims; or assertions in any brochure, flyer, or display by words, pictures, graphs, or otherwise designed to supplement, detract from, supersede, or defeat the purpose or effect of any prospectus or disclosure. 20. Failing to disclose that the broker-dealer is controlled by, controlling, affiliated with, or under common control with the issuer of any security before entering into any contract with or for a customer for the purchase or sale of such security, and if such disclosure is not made in writing, it shall be supplemented by written disclosure at or before the completion of the transaction. 21. Failing to make a bona fide public offering of all of the securities allotted to a broker-dealer for distribution, whether acquired as an underwriter, a selling group member, or from a member participating in the distribution as an underwriter or selling group member. This includes, among other things, (1) transferring securities to a customer's, another broker-dealer's, or a fictitious account with the understanding that those securities will be returned to the broker-dealer or its nominees or (2) “parking” or withholding securities. 22. Failure or refusal to furnish a customer, upon reasonable request, information to which he is entitled or to respond to a formal written request or complaint. 23. Violating any laws or rules of the SEC or a national securities exchange or any national securities association of which it is a member or violating any federal or state securities law or any rule or regulation promulgated thereunder. B. Agents. 1. Lending or borrowing money or securities from a customer (unless such customer is a bona fide financial institution whose business is to borrow or lend), or acting as a custodian for money, securities, or an executed stock power of a customer. 2. Effecting securities transactions not recorded on the regular books or records of the broker-dealer which the agent represents, unless the transactions are authorized in writing by the broker-dealer prior to execution of the transaction. 3. Establishing or maintaining an account containing fictitious information in order to execute transactions which would otherwise be prohibited. 4. Sharing directly or indirectly in profits or losses in the account of any customer without the written authorization of the customer and the broker-dealer which the agent represents. 5. Dividing or otherwise splitting the agent's commissions, profits, or other compensation from the purchase or sale of securities with any person not also registered as an agent for the same broker-dealer, or for a broker-dealer under direct or indirect common control. 6. Engaging in conduct specified in Subsections (A)(1), (2), (3), (4), (5), (6), (8), (11), (12), (16), (17), (18), (19), or (23) of this Rule. The conduct set forth above is not exhaustive. Engaging in other conduct such as forgery, embezzlement, non-disclosure, incomplete disclosure or misstatement of material facts, or manipulative or deceptive practices shall also be grounds for denial, suspension, or revocation of registration, imposition of fines, a bar, or such other action authorized by statute.