Common Regulatory Violations Assignment

Added on - Sep 2019

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Regular ComplianceStudent Name:Coursework:University:
Q1.MemorandumTo: Mr. Financial AdvisorFrom: Mr. SmithDate: 8 Oct’ 2016Subject: Common regulatory violationsRegulatory ComplianceIt is defined as the adherence to laws, guidelines, regulations and specifications which arerelevant to an organization. The violation of regulations leads to the legal punishment whichincludes federal fines. The rules and regulations are rapidly increases which makes thecompliance most prominent in the various organizations. The ethical issues in the financialservices affect an organization. The financial service sector is more ethical than other sectorwhich becomes the image in the eyes of the public. The financial sector comprises of banks,insurance companies, investment banks, mortgage lenders and the financial industry garnersmany headings due to which ethics lapses.The three violations are explained below:Selling awayThe selling away is defined as the incorrect practice of investment professionals in the securitiesbrokerage industry of Unites States in which the securities are sold by the brokerage firm. The
list of a product is approved by the company which means the sales are not approved by thecompany. It is done by the investment professionals which includes financial advisor,stockbroker, representatives who are registered and others. The lists of products which areapproved by the company for selling by the brokers are subjected to the process of due diligenceof the company (Gentzoglanis et al., 2014). The process of due diligence includes receiving theapprovals and reviews from the risk and compliance department of the company. For example,the investment is sold by the broker who is away from the company. The broker marketingsecurities must get the license for different types of securities. The license is issued by thefinancial industry regulatory authority to the brokerage firm in the U.S. It is basically a selling oftransaction which is not approved by the firm. The securities are involved in the privateplacement. The transaction can be deliberated or intentional. The selling away can be avoidedthrough avoiding the various mistakes such as changing in last minutes, completes understandingof the working of deals, a disclosure of important details and avoid bad habits at the table ofnegotiation.ChurningIt is defined as the practice in which trade are executed for investment account which is done bythe broker for generating the commission from the particular account. It is the breach ofsecurities law and the actions taken by the holder of account regarding the returning ofcommission paid by the account holder for any losses due to the choice of stock made by abroker. In this case, court firstly look at the balance in the investment account and then thenumber of times churning has been done. The critics of giving money to the brokers forencouraging the behavior of brokers indirectly. The investments which are providing stablereturns with less fluctuation's in the price leads to generate zero commission for brokers due to
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