Compliance Concepts

Compliance Concepts

Compliance concepts

Fiduciary duty — the obligation to act in the interest of the client (higher than suitability)

Suitability standard — the product must be suitable for the client (standard for brokers)

Best interest standard — to act in the best interest of the client (higher than suitability)

Accredited investor — investor with income >200K or assets >1M (can invest in hedge funds)

Qualified purchaser — stricter standard (assets >5M for hedge funds)

Sophisticated investor — investor with experience (can take more risk)

Professional investor — professional investor (custom regulation)

Insider trading — trading on insider information (prohibited, penalty)

Market manipulation — price manipulation (prohibited)

Front-running — buying or selling ahead of the client (prohibited, conflict of interest)

Churning — excessive trading on the client’s account (for commission, prohibited)

Ponzi scheme — pyramid (new money pays old money)

Pyramid scheme — pyramid (recruiting people is the main income)

Pump and dump — inflating the price and selling (manipulation)

Wash trading — fictitious trading to create the appearance of volume (prohibited)