Many Financial Industry Regulatory Authority (FINRA) disciplinary cases include charges of violation of FINRA Rule 2010, the general ethical rule, either alone or together with more specific alleged rule violations. Indeed, FINRA enforcement appears to use this rule as a sword, without regard to how remote from the investment banking or securities business of the member or the associated person the acts involved are. While FINRA may not recognize it, its jurisdiction over its members and associated persons has limits.
Background
Securities Exchange Act of 1934. The Securities Exchange Act of 1934 was created to “provide for the regulation of securities exchanges and of over-the-counter markets operating in interstate and foreign commerce and through the mail, to prevent inequitable and unfair practices on such exchanges and markets…as set forth.”1 The 1934 Act created the Securities and Exchange Commission “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.2
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