Burr Alert: FINRA Updates Guidance on its Suitability Rule

December 19, 2012

In its Regulatory Notice 12-55, the Financial Industry Regulatory Authority ("FINRA") has updated its guidance on FINRA Rule 2111 concerning suitability.

This is FINRA's fourth regulatory notice concerning the rule -- it previously published Regulatory Notice 12-25, Regulatory Notice 11-25, and Regulatory Notice 11-02 -- but this notice takes the rule in a slightly different direction, at least appearing to soften enforcement of the rule. This guidance is important to brokers and advisors, particularly because Rule 2111 is reported to have been the "most common ground for disciplinary action this year."1

Rule 2111 requires, in pertinent part, that "[a] member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." The rule goes on to clarify that "[a] customer's investment profile includes, but is not limited to, the customer's age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation." It is based on NASD Rule 2310.

To read more about this topic, please see full article below Download PDF


Legal Disclaimer:
No representation is made that the quality of services to be performed is greater than the quality of legal services performed by other lawyers.

Featured Attorneys

send article

TESTIMONIALS

  • "Jackie is a bright attorney and a key part of our team.  She is always willing to do whatever it takes to get the job done and to make sure that our clients are happy with the job we are doing."

    -R. Frank Springfield (Partner)

  • “A strong lawyer…"

    -Chambers 2012

  • “He is an excellent products liability lawyer. He is good in front of a jury, always prepared. He is recognized as an excellent lawyer.”

    -Chambers 2012

  • "Burr & Forman lawyers are high paced and thorough in development and handling of complex issues in land use litigation."

    -Best Lawyers 2012

  • “As a small business owner, I have used Ladd Mark in a variety of capacities over the time that I have known him.  He has helped me through the complex issues of both disposing of and acquiring a business.  At all times during both transactions (and everything that comes up in between), Ladd exemplified the legal competence and professionalism, which I have come to expect from all of my dealings with the staff at Burr Forman. Ladd combines his broad knowledge of legal issues with prompt, courteous service and sincere empathy for a business owner that is truly overwhelmed with the density of transactions.  His communication skills kept me aware of where I stood during transactions.  Ladd has definitely helped me through some difficult situations, and I consider him a friend.”

    -Harold R. “Bubba” Wells, Jr., President of WorkTrux and All About Trucks