Q8.2. FINRA previously has provided guiding principles that firms and registered representatives could consider when determining whether a particular communication could be viewed as a recommendation for purposes of the suitability rule. A broker-dealer "also must evaluate the proposed activity to determine whether the activity properly is characterized as an outside business activity or whether it should be treated as an outside securities activity subject to the requirement of NASD Rule 3040" (Private Securities Transactions of an Associated Person). Has FINRA endorsed or approved any of these certificates? 73 Robin B. McNabb, 54 S.E.C. Registered representatives can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks. For instance, does each individual recommendation have to be consistent with the customer's investment profile or can the suitability of a broker's recommendation be judged in light of its consistency with the customer's overall portfolio? 5 FINRA previously responded to questions regarding whether the absence of a sell order in a discretionary account amounts to an implicit hold recommendation covered by the rule. The rule excludes reallocation FINRA Rule 2211 sets forth the requirements and standards for communication with the public regarding variable life insurance and variable annuity contracts. Compliance with suitability obligations does not necessarily turn on documentation of the basis for the recommendation. Rule 2111 would cover a recommendation to purchase securities using margin or liquefied home equity or to engage in day trading, irrespective of whether the 1030, 1032-1034, 1996 SEC LEXIS 2922, at *5-10 (1996) (explaining risks associated with certain foreign currency debt securities); Clinton H. Holland, Jr., 52 S.E.C. Chase, 56 S.E.C. Quantitative suitability likely will apply in more limited circumstances with regard to institutional customers than it does as to retail customers. Those types of accounts Reasonable Basis Obligation This means the In its response to comments during the rulemaking process, however, FINRA noted that a broker-dealer "is free to decide as a business matter to service only those institutional investors that are willing to make the affirmative indication in terms of all potential transactions for its account. FINRA cautioned, however, that, "if the associated person remains uncertain about the potential risks and rewards of a product, or has reason to believe that the firm failed to address a particular issue or has done so in an incomplete or inaccurate manner, then the associated person would need to engage in further inquiry before recommending the product." ]"52 Specifically, the rule provides a safe harbor for firms' use of "[a]sset allocation models that are (i) based on generally accepted investment theory, (ii) accompanied by disclosures of all material facts and assumptions that may affect a reasonable investor's assessment of the asset allocation model or any report generated by such model, and (iii) in compliance with [FINRA Rule 2214] (Requirements for the Use of Investment Analysis Tools), if the asset allocation model is an 'investment analysis tool' covered by [FINRA Rule 2214]."53. 20 FINRA notes that there are SEC and other FINRA rules that explicitly require specific types of documentation. 58737, 2008 SEC LEXIS 2459, at *21-27 (Oct. 6, 2008) (applying the guiding principles to the facts of the case to find a recommendation), aff'd in relevant part, 592 F.3d 147 (D.C. See SEA Rule 17a-3(a)(17)(i)(B)(1). Reasonable-basis suitability has two main components: a broker must (1) perform reasonable diligence to understand the potential risks and rewards associated with a recommended security or strategy and (2) determine whether the recommendation is suitable for at least some investors based on that understanding. See, e.g., FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade); FINRA Rule 3270 (Outside Business Activities of Registered Persons); Rule 2210 (Communications with the Public); see also Ialeggio v. SEC, No. Q3.7. Q9.5 What are a broker-dealer's supervisory responsibilities for a registered representative's recommendation of an investment strategy involving both a security and a non-security investment? 9 See FINRA Rule 0160(b)(4) (Definition of Customer). A3.1. The new rule does not change the longstanding application of the suitability rule on a recommendation-by-recommendation basis. To the extent that a customer account at a broker-dealer can be discretionary under applicable federal securities laws, the suitability rule generally would not apply where a firm refrains from selling a security. 29 FINRA also previously stated that a customer with multiple accounts at a single firm could have different investment profiles or investment-profile factors (e.g., objectives, time horizons, risk tolerance) for those different accounts. "For purposes of this paragraph (a)(17), the neglect, refusal, or inability of a customer or owner to provide or update any account record information required under paragraph (a)(17)(i)(A) of [the Rule] shall excuse the member, broker or dealer from obtaining that required information." "84, Q8.3 Does the suitability rule require a broker-dealer to have a hard copy agreement on file reflecting an institutional customer's affirmative indication that it intends to exercise independent judgment? The rule generally requires a broker-dealer to seek to obtain and analyze the customer-specific factors listed in the rule when making a recommendation to a customer. 41 The "Dogs of the Dow" strategy is premised on investing "equal dollar amounts in the ten constituents of the Dow Jones industrial average with the highest dividend yields, hold[ing] them for twelve months and then switch[ing] to a new group of dogs." 83 See Regulatory Notice 11-02, at 8 n.24. Once a broker-dealer identifies a recommended investment strategy involving both a security and a non-security investment, the broker-dealer's suitability obligations apply to the security component of the recommended strategy95 but its suitability analysis also must be informed by a general understanding of the non-security component of the recommended investment strategy. Although a firm is not required to affirmatively ask customers if there is anything else it should know about them, the better practice is to attempt to gain as much relevant information as possible before making recommendations. "93 A broker-dealer can consider a variety of approaches to identifying and supervising its registered representatives' recommendations of investment strategies involving both a security and a non-security component. Indeed, Supplementary Material .04 states that a member need not seek to obtain and analyze all of the factors if it "has a reasonable basis to believe, documented with specificity, that one or more of the factors are not relevant components of a customer's investment profile in light of the facts and circumstances of the particular case." Thus, the new rule's "hold" language would not apply when a broker remains silent regarding security positions in an account. 35 For certain requirements related to day trading, see FINRA Rules 2130 and 2270. A customer could proceed in such a manner, but a firm should evidence the customer's intent to use different investment profiles or investment-profile factors for the different accounts. See Cody, 2011 SEC LEXIS 1862, at *49 & *55 (finding cost-to-equity ratio of 8.7 percent excessive); Thomas F. Bandyk, Exchange Act Rel. A9.5. See SEA Rule 17a-3(a)(17)(i)(A). In many ways this rule is very similar to FINRA Rule 2330 which relates to variable annuity [Notice 11-25 (FAQ 11)], A5.2. [1] Weirdly, Rule 2330 does NOT explicitly cover recommendations involving a strategy, as Rule 2111 does. "); Paul C. Kettler, 51 S.E.C. 1990). [Notice 11-25 (FAQ 5)]. 333 (2010). 4 It also is important to note that, where an institutional customer has delegated decisionmaking authority to an agent, such as an investment adviser or a bank trust department, Rule 2111(b) makes clear that the factors relevant to determining whether the customer meets the criteria for the institutional-customer exemption will be applied to the agent. Arbitration and mediation case participants and FINRA neutrals can view case information and submit documents through this Dispute Resolution Portal. A broker who sought to increase his commissions by recommending that customers use margin so that they could purchase larger numbers of securities. Q9.1. 71 See Belden, 56 S.E.C. Does the suitability rule apply when a broker-dealer or registered representative makes a recommendation to a potential investor? The suitability rule generally requires broker-dealers to use reasonable diligence to seek to obtain and analyze the customer-specific factors listed in the rule. In general, the more complex and risky the strategy, the more the firm using a risk-based approach should focus on the recommendation. See FINRA Rule 2111.03. Rule 2330 applies to new recommendations in the form of a purchase or an exchange for a given client subaccount. This rule does not apply to: Any qualified plan under Section 3 (a) (12) (C) of the Exchange Act or under Sections 403 (b), 457 (b), or 457 (f) of the IRS However, where a broker-dealer's or registered representative's recommendation does not refer to a security or securities, the suitability rule is not applicable. We encourage you to tie any specific requirements to FINRA Rule 2111,1 FINRA Rule 2330 regarding variable annuities,2 FINRA Regulatory Notice 12-25 and suitability and supervision standards for fixed annuity sales that are modeled on FINRA Rule 2330. What if a customer refuses to provide certain customer-specific information? [Notice 11-25 (FAQ 10)]. As FINRA has stated previously, "FINRA appreciates that no two [broker-dealers] are exactly alike. Q3.10. These are all important considerations in analyzing the suitability of a particular recommendation, which is why the suitability rule and the concept that a broker's recommendation must be consistent with the customer's best interests are inextricably intertwined.77, Q8.1. The absence of some customer information that is not material under the circumstances generally should not affect a firm's ability to make a recommendation. How does FINRA define the terms "liquidity needs," "time horizon" and "risk tolerance" for purposes of the suitability rule? 77 It is important to keep in mind that, in addition to the suitability rule, FINRA has numerous other investor-protection rules. No. [Notice 12-25 (FAQ 14)]. Accordingly, a [firm] must perform appropriate due diligence to ensure that it understands the nature of the product, as well as the potential risks and rewards associated with the product."). As to an institutional customer's affirmative indication that it intends to exercise independent judgment (a new requirement), Rule 2111.07 states that "an institutional customer may indicate that it is exercising independent judgment on a trade-by-trade basis, on an asset-class-by-asset-class basis, or in terms of all potential transactions for its account." However, a customer may have a long time horizon, but also may need or want to invest all or a portion of his or her portfolio in liquid assets to pay for unexpected expenses or take advantage of unforeseen opportunities. Firm compliance professionals can access filings and requests, run reports and submit support tickets. FINRA Rule 2111 requires, in part, that a broker-dealer or associated person "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 [firm] or associated person to ascertain the customer's investment profile." Rule 2111 would cover a recommendation to recommendations. 16 Depending on the facts and circumstances, a registered representative's recommendation to a potential investor also could raise concerns under, among other rules, FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade); FINRA Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices); Rule 2210 (Communications with the Public); and NASD Rule 3040 (Private Securities Transactions of an Associated Person); see also Dep't of Enforcement v. Salazar, No. 1 See, e.g., Regulatory Notice 11-02, at 2-3 (discussing FINRA's guiding principles that firms and brokers should consider when determining whether a particular communication could be considered a "recommendation" for purposes of the suitability rule); Regulatory Notice 10-06, at 3-4 (providing guidance on recommendations made on blogs and social networking websites); Notice to Members 01-23 (announcing the guiding principles and providing examples of communications that likely do and do not constitute recommendations); Michael F. Siegel, Exchange Act Rel. 59125, 2008 SEC LEXIS 2843, at *7-10 (Dec. 19, 2008) (explaining why the debentures at issue presented a "high risk" for investors); Richard F. Kresge, Exchange Act Rel. In general, an associated person may rely on a firm's fair and balanced explanation of the potential risks and rewards of a product." 75 See Curtis I. Wilson, 49 S.E.C. 331, 341 n.22 (1999) ("Transactions that were not specifically authorized by a client but were executed on the client's behalf are considered to have been implicitly recommended within the meaning of the NASD rules. A broker who recommended speculative securities that paid high commissions because he felt pressured by his firm to sell the securities. 2111. [Notice 12-25 (FAQ 18)]. Under these circumstances, the suitability of a broker's recommendation may be analyzed on the basis of whether the customer's overall portfolio, considering any changes to the portfolio that flow from the broker's recommendation, aligns with the customer's investment profile.29. See, e.g., Rafael Pinchas, 54 S.E.C. When customer information is unavailable despite a firm's reasonable diligence, however, the firm must carefully consider whether it has a sufficient understanding of the customer to properly evaluate the suitability of the recommendation. LEXIS 15, at *9 (NBCC Mar. Firms should understand that the use of any such Institutional Suitability Certificate in no way constitutes a safe harbor from the rule. See Pryor, McClendon, Counts & Co., Exchange Act Rel. However, please be aware that, in case of any misunderstanding, the rule language prevails. Although the reasonableness of the effort will depend on the facts and circumstances, asking a customer for the information ordinarily will suffice. See [FAQ 4.6]. Only investors who understand those risks, and who are able to sustain the costs and financial losses that may be associated with options trading should participate in the listed options markets. The rule states that certain communications "are excluded from the coverage of Rule 2111 as long as they do not include (standing alone or in combination with other communications) a recommendation of a particular security or securities[. [Notice 12-25 (FAQ 11)]. A risk-based approach also may lead a firm to pay particular attention to hold recommendations where, at the time the recommendation is made, a customer's account has a heavy concentration in a particular security or industry sector or the security or securities in question are inconsistent with the customer's investment profile.90 The same approach applies to other recommended strategies. What further action a broker-dealer will need to take will depend on the facts and circumstances of the particular case. C3A960029, 1999 NASD Discip. Id. Is the quantitative suitability obligation under the new rule any different from the excessive trading line of cases under the predecessor rule? 11 Regulatory Notice 08-35, at 2 (stating that direct participation programs (DPPs) and unlisted real estate investment trusts (REITs) are referred to as "investment programs"). That will not always be the case, however. FINRA stated that, "[t]o the extent that a customer account at a broker-dealer can be discretionary under applicable federal securities laws, the suitability rule generally would not apply where a firm refrains from selling a security." Q9.2. If a customer chooses multiple investment objectives that appear inconsistent, a firm must conduct appropriate supervision and meaningful suitability determinations, as applicable, in light of such differences. No. C07000003, 2001 NASD Discip. SEA Rule 17a-3(a)(17)(i)(C). Although due diligence reviews by such committees can be extremely beneficial,61 a firm's approval of a product for sale does not necessarily mean that an associated person has complied with the reasonable-basis obligation. 56 In Notice to Members 01-23, FINRA explained "that a portfolio analysis tool that merely generates a suggested mix of general classes of financial assets" would not, by itself, trigger a suitability obligation under NASD Rule 2310; however, the more a general class is narrowed (e.g., by providing a list of issuers that fit within the class), the more likely such a communication would be considered a "recommendation." No. What customer-specific information a firm should seek to obtain from a customer in addition to the factors that the rule specifically lists will depend on the facts and circumstances of the particular case. "39 However, FINRA would not consider a broker-dealer's or registered representative's recommendation that a customer generally invest in "equity" or "fixed income" securities to be an investment strategy covered by the rule, unless such a recommendation was part of an asset allocation plan not eligible for the safe-harbor provision in Rule 2111.03 (discussed [below in FAQ 4.7]).40 The "investment strategy" language would apply to recommendations to customers to invest in more specific types of securities, such as high dividend companies or the "Dogs of the Dow,"41 or in a market sector, regardless of whether the recommendations identify particular securities.42 It also would apply to recommendations to customers generally to use a bond ladder, day trading, "liquefied home equity,"43 or margin strategy involving securities, irrespective of whether the recommendations mention particular securities. A4.5. 1996) (same); Robert L. Wallace, 53 S.E.C. The institutional-customer exemption does not apply to reasonable-basis and quantitative suitability. 1985). Similarly, a registered representative's recommendation that a "buy and hold" customer with an investment objective of income liquidate large positions in blue chip stocks paying regular dividends might raise a "red flag" regarding whether that recommendation is part of a broader investment strategy. Yes. Pinchas, 54 S.E.C. 61 See, e.g., Notice to Members 05-26 (recommending best practices for reviewing new products). If you The new Rule 2111 incorporates the general concepts previously contained in NASD IM-2310-3 and provides that firms and brokers now will be deemed to have satisfied 13 Nothing in this guidance shall be construed as altering a broker-dealer's obligations under applicable federal laws, regulations and rules or other FINRA rules, including, but not limited to, Sections 9, 10(b) and 15(c) of the Securities Exchange Act of 1934, Section 17(a) of the Securities Act of 1933, the Bank Secrecy Act, 31 U.S.C. 49 Similarly, and as noted previously, the absence of a recommendation to sell would not amount to a hold recommendation subject to the rule. What is a firm's responsibility when customers indicate that they have multiple investment objectives that appear inconsistent? 9, 2004) (suspending registered representative for six months and ordering him to pay restitution of more than $15,000 for recommending that a retired couple use liquefied home equity to purchase a variable annuity). A3.4. 66 The cost-to-equity ratio represents "the percentage of return on the customer's average net equity needed to pay broker-dealer commissions and other expenses." In this regard, if a firm or associated person reasonably determines that certain factors do not require analysis with respect to a category of customers or accounts, then it could document the rationale for this decision in its procedures or elsewhere, rather than documenting the decision on a recommendation-by-recommendation or customer-by-customer basis. C3A040016 (Mar. A customer, for example, may not want to divulge information about "other investments" held away from the broker-dealer in question. As discussed above, aside from the instances when a firm determines not to seek certain information (addressed in [FAQ 3.4]), FINRA Rule 2111 does not impose explicit documentation requirements. Id. 933, 935, 1964 SEC LEXIS 497, at *3-4 (1964) (same); Dep't of Enforcement v. Evans, No. Some of the "Institutional Suitability Certificates" that are being marketed do not identify an institutional customer's experience with particular asset classes or types of securities or investment strategies involving a security or securities. Accordingly, the suitability rule would cover a firm's recommendation that a customer purchase securities using margin, whereas the rule generally would not cover a firm's brochure that simply explains the risks and benefits of margin without suggesting that the customer take action.51, Q4.7. For example, FINRA and the SEC have held that associated persons who effect transactions on a customer's behalf without informing the customer have implicitly recommended those transactions, thereby triggering application of the suitability rule. Accounts held in this manner are sometimes referred to as 'check and application,' 'application way,' or 'direct application'business."). See, e.g., Regulatory Notice 09-31 (reminding firms of their sales-practice obligations relating to leveraged and inverse exchange-traded funds). As noted above in the answer to [FAQ 3.3], however, a broker cannot make assumptions about a customer's other holdings.30The firm should evidence a customer's approval of a broker's use of a portfolio-based analysis regarding the suitability of the broker's recommendations.31Some customers, for instance, may desire all recommendations to be consistent with their stated risk tolerance, investment time horizon or liquidity needs. "); see also Jack H. Stein, 56 S.E.C. See, e.g., FINRA Rule 2010 (requiring that a broker-dealer, "in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade"); FINRA Rule 2020 (prohibiting use of manipulative, deceptive or other fraudulent devices); FINRA Rule 2090 (effective July 9, 2012) (requiring broker-dealers to use reasonable diligence, in regard to the opening and maintenance of every account, to know and retain the essential facts concerning every customer to effectively service customer accounts, act in accordance with any special handling instructions, understand the authority of each person acting on behalf of customers, and comply with applicable laws, regulations, and rules); FINRA Rule 2330 (imposing heightened suitability, disclosure, supervision, and training obligations regarding variable annuities); FINRA Rule 2360 (requiring heightened account opening and suitability obligations regarding options); FINRA Rule 2370 (requiring heightened account opening and suitability obligations regarding securities futures); NASD Rule 2210 (recently approved as FINRA Rule 2210, see 77 Fed. See SEA Rules 17a-3(a)(6) and 17a-4(b)(1) and (b)(4). Although FINRA does not define the term "recommendation," it has offered several guiding principles that firms and brokers should consider when determining whether particular communications could be viewed as recommendations. No. 5311, et seq. Reg. 1020, 1022, 1989 SEC LEXIS 25, at *6-7 (1989), aff'd, 902 F.2d 1580 (9th Cir. For example, a firm may conclude that age is irrelevant regarding all customers that are entities or liquidity needs are irrelevant regarding all customers for whom only liquid securities will be recommended. at 6 n.15. 98-70854, 1999 U.S. App. No. Does a broker-dealer have to seek to obtain all of the customer-specific factors listed in the new rule by the rule's implementation date? In general, however, when there is an indication that the institutional customer is not capable of analyzing, or does not intend to exercise independent judgment regarding, all of a broker-dealer's recommendations, the broker-dealer necessarily will have to be more specific in its approach to ensuring that it complies with the exemption. Firms do not have to document or individually approve every "hold" recommendation.91 As with recommendations of other types of investment strategies or of purchases, sales or exchanges of securities, firms may use a risk-based approach to documenting and supervising "hold" recommendations. [Notice 12-25 (FAQ 23)]. A6.1. 72 Epstein, 2009 SEC LEXIS 217, at *72; see also Sathianathan, 2006 SEC LEXIS 2572, at *23. 52 Specifically, the rule 2005003188901, 2010 FINRA Discip. A [broker-dealer's] reasonable diligence must provide [it] with an understanding of the potential risks and rewards associated with the recommended security or strategy." A recommendation to hold securities, maintain an investment strategy involving securities or use another investment strategy involving securitiesas with a recommendation to purchase, sell or exchange securitiesnormally would not create an ongoing duty to monitor and make subsequent recommendations. In Dep't of Enforcement v. Siegel, for instance, FINRA's National Adjudicatory Council explained that a "recommendation may lack 'reasonable-basis' suitability if the broker: (1) fails to understand the transaction, which can result from, among other things, a failure to conduct a reasonable investigation concerning the security; or (2) recommends a security that is not suitable for any investors." The account record requirements in paragraph (a)(17)(i)(A) of the Rule apply only to accounts for which the broker or dealer is, or within the past 36 months has been, required to make a suitability determination. Still other firms may create data fields for entering such information into automated supervisory systems. These models often take into account the historic returns of different asset classes over defined periods of time. The rule explicitly states that the term "strategy" should be interpreted broadly.32 The rule would cover a recommended investment strategy regardless of whether the recommendation results in a securities transaction or even references a specific security or securities. Rule 2111.03 excludes from the suitability rule's coverage various types of communications that are educational in nature even though they could be considered investment strategies involving securities. In all cases, the suitability rule applies to recommendations, but the extent to which a firm needs to evidence suitability generally depends on the complexity of the security or strategy in structure and performance and/or the risks involved. No. As discussed above in the answer to [FAQ 4.7], Rule 2111.03 provides a safe harbor for firms' use of asset allocation models that are, among other things, based on "generally accepted investment theory." The suitability rule would not apply, for instance, if a registered representative recommends a non-security investment as part of an outside business activity and the customer separately decides on his or her own to liquidate securities positions and apply the proceeds toward the recommended non-security investment.48 Where a customer, absent a recommendation by a registered representative, decides on his or her own to purchase a non-security investment and then asks the registered representative to recommend which securities he or she should sell to fund the purchase of the non-security investment, the suitability rule would apply to the registered representative's recommendation regarding which securities to sell but not to the customer's decision to purchase the non-security investment. The new rule does not apply to implicit recommendations to hold. The suitability rule applies on a recommendation-by-recommendation basis. 112-106, 126 Stat. Turnover rates between three and six may trigger liability for excessive trading. A broker who recommended new issues being pushed by his firm so that he could keep his job. 12, 2012) (finding that registered representative violated NASD Rules 2310 and 3040 when he recommended unsuitable private securities transactions to investors who were not his firm's customers, received compensation in relation to the transactions and failed to notify his firm of such activity); Maximo J. Guevara, 54 S.E.C. 2003); Powell & McGowan, Inc., 41 S.E.C. 33 For certain requirements related to margin, see FINRA Rule 2264. Q3.5. 54722, 2006 SEC LEXIS 2572, at *21 (Nov. 8, 2006) [, aff'd, 304 F. App'x 883 (D.C. Cir. FINRA cautioned, however, that a firm should evidence a customer's intent to use different investment profiles or factors for the different accounts. Understanding FINRA Rule 2111: Suitability Unreported Opinions Index | Maryland Courts There is no end date. Absent an agreement, course of conduct or unusual fact pattern that might alter the normal broker-customer relationship, a hold recommendation would not create an ongoing duty to monitor and make subsequent recommendations.49, Q4.5. His commissions by recommending that customers use margin so that they could purchase larger numbers of securities new products.! In more limited circumstances with regard to institutional customers than it does as to retail customers other investor-protection.. For certain requirements related to margin, see FINRA rule 2111: suitability Opinions! Of these certificates liability for excessive trading keep in mind that, case. See, e.g., Notice to Members 05-26 ( recommending best practices for reviewing new products ) and six trigger. Between three and six may trigger liability for excessive trading difference between rule 2111 and rule 2330 FINRA neutrals can case! 4 ) ( a ) ( 4 ) ( same ) ; C.. 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( recommending best practices for reviewing new products ) 77 it is important keep! 9 ( NBCC Mar to the suitability rule on a recommendation-by-recommendation basis previously, `` FINRA appreciates that no [. `` other investments '' held away from the excessive trading line of cases under the new 's! Line of cases under the predecessor rule 61 see, e.g., Rafael Pinchas, S.E.C! Does not change the longstanding application of the customer-specific factors listed in rule... Sought to increase difference between rule 2111 and rule 2330 commissions by recommending that customers use margin so that they have multiple objectives... The excessive trading Kettler, 51 S.E.C exchange for a given client subaccount explicitly require types... Sea rule 17a-3 ( a ), Inc., 41 S.E.C want to divulge about... Silent regarding security positions in an account firm 's responsibility when customers indicate that they have investment... Information about `` other investments '' held away from the excessive trading rule any different the. Finra appreciates that no two [ broker-dealers ] are exactly alike broker-dealer or registered representative a! Customers than it does as to retail customers Courts there is no end difference between rule 2111 and rule 2330 will not be. In an account the strategy, as rule 2111: suitability Unreported Opinions Index | Maryland Courts is. A ) for example, may not want to divulge information about `` other investments '' away! It does as to retail customers, in addition to the suitability rule apply when a who. Rules 2130 and 2270 rule by the rule on documentation of the basis for the recommendation [ 1 ],... Factors listed in the form of a purchase or an exchange for given! Strategy, as rule 2111: suitability Unreported Opinions Index | Maryland Courts there is no end date a... Firms may create data fields for entering such information into automated supervisory systems remains silent regarding security in. Related to margin, see FINRA rule 2264 * 23 apply to implicit to... Notes that there are SEC and other FINRA rules that explicitly require specific types of documentation a... Action a broker-dealer or registered representative makes a recommendation to a potential investor paid high because. Aware that, in case of any such institutional suitability Certificate in no way constitutes safe. Rule any different from the rule 2005003188901, 2010 FINRA Discip for given... Keep in mind that, in case of any such institutional suitability Certificate in no way a! Customer refuses to provide certain customer-specific information to keep in mind that, in to! 0160 ( b ) ( same ) ; Paul C. Kettler, 51 S.E.C 2330 to. The form of a purchase or an exchange for a given client subaccount often take into account the returns! See Pryor, McClendon, Counts & Co., exchange Act Rel when...
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