Saturday, January 8, 2011

Anti-Reciprocal Rule

The 'Anti-Reciprocal Rule' is a rule created by FINRA (the Financial Industry Regulatory Authority), which is designed to protect investors from conflicts of interests from deals between mutual funds and brokerage firms. An example of a practice that would likely contravene the rule would be where a brokerage firm directs its clients into a mutual fund, which in turn does its trading through the brokerage firm - the risk is that the mutual fund seeks to generate higher sales in exchange for doing their trades through that broker, at rates which may not be the most competitive (or at worst, inflated to hide a quasi- or de facto sales fee).

Synonyms: Conflicts of interest

Comments?
If you have any further questions or would like to add to this fund management term, then please submit your thoughts below.

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