Each month when you review the Regulatory Notice announcing the disciplinary actions taken by FINRA Enforcement against brokers, you'll generally see cases involving violations of the selling away rule (private securities transactions) as well as the outside business activity rule.
During my days at NASD, I investigated and prosecuted a number of these cases, and now often represent brokers caught up in an investigation into this type of conduct. Sometimes, the violations are inadvertent, because the broker didn't know or fully understand the rule. With respect to the selling away rule, sometimes the violation comes because the broker trusted the wrong person and believed that the product was not a security, and then in some cases, failed to consider the implication of the outside business activity rule. Because of the significant consequences to a violation of these rules, it is important for brokers to understand these rules.
Today's video blog addresses the basics of the selling away rule. Remember, though, that this video is for general informational purposes, and it is indeed a good idea for you to explore the impact of these rules before you get involved in any activity or transaction without your firm's knowledge - so consult your own counsel for help with these issues.
Also, keep in mind that if you find yourself under review by your firm, or a regulator, for a possible violation of these rules, it would be very wise for you to speak with an experienced securities lawyer, as the end result of these investigations can have a significant impact on your career. Finally, remember that the industry rules convey a minimum standard, your firm's procedures may be more stringent, or may impose additional requirements, so be sure to check those out as well.