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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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