13.2 Prohibited and Unethical Practices
NASAA Model Rules define specific prohibited, fraudulent, and manipulative practices that trigger civil liability, administrative sanctions, and criminal prosecution.
Key NASAA Exam Takeaways
- Churning: Excessive trading in a client account to generate commission income.
- Borrowing from or Lending to Clients is prohibited UNLESS the client is a financial institution in the business of lending, or an immediate family member.
- Sharing in client profits and losses is strictly prohibited for IAs and IARs; permitted for BD agents ONLY with written client and BD consent.
- Guaranteeing a client against market loss or promising a specific minimum return is strictly unlawful.
- Third-Party Research: Must disclose source; using third-party research without attribution constitutes plagiarism.
Interactive Knowledge Checkpoint • Section 13.2
Under NASAA Model Rules, in which of the following circumstances may an Investment Adviser Representative (IAR) borrow money from a client?