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Expectations Of Your Broker




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This article is from the What Every Investor Should Know.

Expectations Of Your Broker

If your broker-dealer makes investment recommendations, those recommendations must be suitable to your financial situation and investment objectives. This does not mean that you are protected against a decline in value of securities purchased on a broker's recommendation, only that the recommendation itself should not be out of line with the information you have furnished the broker regarding your investment objectives or financial circumstances.

You should be aware that broker-dealers' revenues largely depend on the amount of commissions generated and the level of trading activity in your account, not on whether the value of your investments increase or decrease. Pressuring customers into trading securities simply to generate commissions, regardless of the benefits to the customer, is known as "churning" and is prohibited by SEC rules as well as by the codes of conduct of the various SROs.

 

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