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All written complaints received from a customer or from an individual acting on behalf of the customer must be reported promptly to the principal of the firm. The firm must maintain a separate customer complaint folder even if it has not received any written customer complaints. If the firm's file contains complaints, the file must state what action was taken by the firm, if any, and it must disclose the location of the file containing any correspondence relating to the complaint. When a written complaint is received by mail or email, the customer who has issued the complaint must be notified that the complaint has been received. If a customer files a complaint and subsequently withdraws the complaint the firm is still requested to maintain the correspondence relating to the complaint in the firm's complaint file.


An unauthorized transaction is one that is made for the benefit of a customer's account at a time when the customer has no knowledge of the trade and the adviser does not have discretionary power over the account.


Fraud is denned as any act that is employed to obtain an unfair advantage over another party. Fraudulent acts include:

• False statements

• Deliberate omissions of material facts

• Concealment of material facts

• Manipulative and deceptive practices

• Forgery

• Material omission . Lying


It is inappropriate for an adviser to make blanket recommendations in any security, especially low-priced speculative securities. No matter what type of investment is involved, a blanket recommendation to a large group of people will always be wrong for some investors. Different investors have different objectives, and the same recommendation will not be suitable for every investor.

EXAMPLE Mr. Jones, an agent with XYZ brokers, has a large customer base that ranges

from young investors who are just starting to save to institutions and retirees. Mr. Jones has been doing a significant amount of research on WSIA Industries, a mining and materials company. Mr. Jones strongly believes that WSIA is significantly undervalued based on its assets and earning potential. Mr. Jones recommends WSIA to all his clients. In the next six months the share price of WSIA increases significantly as new production dramatically increases sales, just as Mr. Jones's research suggested. The clients then sell WSIA at Mr. Jones's suggestion and realize a significant profit.

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