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Simple English definitions for legal terms
shingle theory
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A quick definition of shingle theory:
Shingle theory: When a broker-dealer engages in the securities business, they are implicitly representing to the world that the conduct of all its employees will be fair and meet professional norms. This means that they must be held to a high standard of conduct, as they are holding themselves out as experts in investments and securities. The shingle theory is an extension of the common law doctrine of 'holding out', and it means that brokers who hold themselves out as experts will be held to a higher standard of care in making recommendations to their customers and dealing with their accounts.
A more thorough explanation:
Definition: The idea that a broker-dealer must be held to a high standard of conduct because by engaging in the securities business, the broker-dealer implicitly represents to the world that the conduct of all its employees will be fair and meet professional norms.
For example, if a broker-dealer hangs out a shingle advertising their services, they are representing themselves as experts in the securities industry. As a result, they are held to a higher standard of care in making recommendations to their customers and dealing with their accounts.
The shingle theory is an extension of the common law doctrine of "holding out." This means that when brokers hold themselves out as experts in investments or securities of a particular issuer, they are held to a higher standard of care in their conduct.