{"id":352706,"date":"2017-05-16T16:44:16","date_gmt":"2017-05-16T21:44:16","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/consumer\/securities-law\/what-is-selling-away.html"},"modified":"2023-12-13T07:55:19","modified_gmt":"2023-12-13T12:55:19","slug":"what-is-selling-away","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/consumer\/securities-law\/what-is-selling-away.html","title":{"rendered":"What Is Selling Away?"},"content":{"rendered":"\n
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What Is Selling Away?<\/h1>\n
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\n By Oni Harton, J.D.<\/a> | Legally reviewed by Melissa Bender, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

There’s no shortage of laws, rules, and regulations when it comes to the securities industry. Due to market crashes, Ponzi schemes, and other securities fraud, the number of rules only increases as time goes on.<\/p>\r\n

Legal regulations for the securities market seek to protect investors and the market<\/a>. Many types of investments are subject to securities laws, rules, and regulations<\/a>. Some of these rules relate to a practice called \u201cselling away."<\/p>\r\n

Selling away transactions involve investment professionals selling securities that aren’t offered by their brokerage firm. These investments are sold without the firm’s approval, knowledge, or supervision.<\/p>\r\n

These transactions are often prohibited because such investments are high-risk. A firm’s approved products undergo due diligence. This is not always the case with products not offered by the broker’s firm.<\/p>\r\n

Read on to learn more about selling away and why it’s prohibited in general.<\/p>\r\n

What Is Selling Away?<\/h2>\r\n

Selling away fraud refers to the practice of a broker selling securities that aren’t offered or approved by the investment professional’s firm. It occurs when a broker sells you a product that isn’t approved in the regular course or scope of business of one’s firm<\/a>.<\/p>\r\n

Selling away can be legal. The broker can give notice of the transaction to the firm and it must sign off on the transaction. Once the firm approves the unregistered transaction, the firm must supervise the transaction. Otherwise, the broker might bypass the brokerage firm’s compliance department and engage in risky investments.<\/p>\r\n

FINRA rules generally prohibit a registered representative or associated person from selling any security away from the member firm unless it is authorized by the firm. Any investment professional, such as brokers or financial advisors, who sells or solicits the sale of securities that the firm doesn’t or cannot offer may be guilty of selling away from the firm. Such transactions are excluded from account statements and records of the brokerage firm.<\/p>\r\n

Prohibition of Selling Away<\/h3>\r\n

Selling away is a common occurrence in the securities industry. In general, selling away is prohibited because of its susceptibility to fraud, deception<\/a>, and increased risk to investors. One danger with selling away is that an investor may be misled.<\/p>\r\n

In selling away cases, an investor can be led to believe that the broker’s firm endorses the unapproved investment product. This can give the investment a false sense of legitimacy and security.<\/p>\r\n

Examples of selling away include:<\/p>\r\n