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FINRA Rule 3260

Regulates a member firm’s handling of discretionary trading authority in customer accounts, requiring written customer authorization and firm approval before exercising discretionary power.

Rule Overview

Jurisdiction: United States

Regulator: FINRA

Topic: Conflict of Interest

Overview
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Prohibits a registered representative from exercising discretion in a customer’s account, such as deciding what security to buy or sell, how much, and when. unless the customer has given prior written authorization and the firm has accepted the account in writing.

Even with such authorization, firms must ensure that discretionary transactions are reviewed regularly for compliance with suitability and other supervisory standards.

The rule also includes provisions restricting unauthorized or excessive trading and mandates prompt review and documentation of discretionary activity.

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