Series 66: 9.3.6.2. Unauthorized Principal Transactions

9.3.6.2. Unauthorized Principal Transactions

While broker-dealers regularly sell their customers securities from their own inventory of securities (known as acting as a “principal”), it is far less common for an investment adviser to do the same thing. Since an investment adviser is not registered as a “dealer,” and recommending the purchase of securities out of its own inventory presents a conflict of interest, an investment adviser who engages in principal transactions must do the following