Prohibited Investment Activities In Florida

Florida Securities and Investment Fraud, Misrepresentation and Negligent Supervision FINRA Arbitration and Litigation Attorney Russell L. Forkey, Esq.

Prohibited Investment Activities in Florida:

The securities business is one of the most highly regulated business in the United States.  The purpose of this post is to provide the reader with general information concerning those activities that the Florida Office of Financial Regulation has determined to be prohibited activities.  Please keep in mind that this information is being provided for educational purposes only and is not designed to be complete in all material respects.  Thus, it should not be relied upon as providing legal or investment advice.  If you have any questions relative to this post, you should contact a qualified professional. 

There are a number of federal, state and self-regulatory levels that relate to the securities business.  One such level are those established by various states.  This post specifically relates to certain regulations adopted in the State of Florida.

In addition to the provisions of Florida Statute 517 that relate to the relationship between customers and broker/dealer account executives, the Florida Administrative Code identifies in Section 69W-600.013 certain other prohibited business practices for broker/dealers and their associated persons.

For example, the following are deemed demonstrations of unworthiness by an associated person of a dealer under Section 517.161(1)(h), F.S., without limiting that term to the practices specified herein:

(a) Borrowing money or securities from a customer, except when persons are in compliance with FINRA Rule 3240(a)(1), (a)(2)(A)-(C) only, and FINRA Conduct Rule 3240(b)-(c), as these rules existed on June 28, 2010;

(b) Acting as a custodian for money, securities or an executed stock power of a customer;

(c) Effecting transactions in securities, or investments as defined by Section 517.301(2), F.S., not recorded on the regular books or records of the dealer, which the associated person represents, unless the transactions are disclosed to, and authorized in writing by, the dealer prior to execution of the transactions;

(d) Operating an account under a fictitious name, unless disclosed to the dealer, which the associated person represents;

(e) Sharing directly or indirectly in profits or losses in the account of any customer without the written authorization of the customer and the dealer, which the associated person represents;

(f) Dividing or otherwise splitting commissions, profits or other compensation in connection with the purchase or sale of securities in this state with any person not also licensed as an associated person for the same dealer, or for a dealer under direct or in indirect common control;

(g) Failing to furnish to each offeree of a Small Corporate Offering Registration (SCOR) a copy of the "Florida Guide to Small Business Investments", OFR-S-13-97, which is incorporated by reference in subsection 69W-301.002(7), F.A.C.; and

(h) Engaging in any of the practices specified in paragraph (1)(a), (b), (e), (f), (g), (h), (i), (k), (l), (m), (n) or (o).

 If the reader desires to review the entire cited provision of the administrative code, please follow the highlighted link.