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

  • “I work with a lot of lawyers in several states and Greg Harley is one of my favorites; he makes my job easy. He is very efficient, responsive and gets good results for us. I am very pleased.”

    -In-house counsel for a national banking institution

  • “We deal with the maritime attorneys in the firm. They follow instructions well and submit timely reports. They are easy to work with and try to facilitate the best possible results. They have maritime expertise. Certain attorneys in the firm have committed their careers to the maritime industry.”

    -Chambers 2012

  • “They are all excellent attorneys; exceptionally bright, decisive and creative."

    -Chambers 2012

  • "Erich is extremely efficient and responsive which results in a high level of trust in our relationship."

    -Anonymous

  • "Erich is a tremendous resource for our company. He has superior legal knowledge accompanied by strong negotiation skills.  These attributes coupled with a strong conviction to great customer service and an affable personal style yields great results for us."

    -Anonymous