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


  • “Mike Atchison is a gentleman and has a great legal mind. We use him for highly complex advisory work.”

    -Chambers 2012

  • “Graham Stieglitz and his firm are my go-to guys for bankruptcy related matters.”

    -Chambers 2012

  • “They handle a diverse set of issues – well staffed, well prepared and respected…"

    -Chambers 2012

  • "I've been impressed with the firm, very much so. They've been exceptionally successful in terms of the results they've obtained. They've achieved pretty much a universal success in terms of their litigation abilities. They've been exemplary."

    -Chambers 2013

  • "A great lawyer: she is practical. When you work on a deal she will protect the client and do it right, but won't waste time on unnecessary issues."

    -Chambers 2013