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

  • “Outstanding…"

    -Chambers 2012

  • "Burr & Forman has very good experience, and I would highly recommend the firm."

    -Best Lawyers 2012

  • “Definitely have depth and expertise...They have a successful model and one that I’ve tried to imitate."

    -Chambers 2012

  • “He has an in-depth understanding of creditors’ rights law and bankruptcy law. He is extremely responsive and is capable of seeing the business side of workouts, not just the legal side. He helps come up with a solution that is often times mutually acceptable to both sides and is tremendously successful in all the work he’d done. By far my favorite bankruptcy lawyer in Florida.”

    -Chambers 2012

  • “Words cannot express the gratitude AVT Simulation has for Burr Forman, and particularly, Peter Vilmos in handling our corporate legal needs.  But if they did, they would be: consummate professionals, exceptional character, highly responsive, team partner, fair, informative, and committed.”

    -Cliff Ingari, Chief Operating Officer, AVT Simulation