45402, 2002 SEC LEXIS 284, at *20-21 & n.10 (Feb. 6, 2002) (holding that the defendant broker "controlled" the account because he essentially was a co-conspirator with the institutional customer's investment officer, who was authorized to place orders for the institutional customer's account). [See infra note 38] (emphasis in original). Although such holdings continue to act as precedent regarding those issues, the new rule does not broaden the scope of implicit recommendations. 20 FINRA notes that there are SEC and other FINRA rules that explicitly require specific types of documentation. 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[.]" 149, 153 & 156-157, 2003 SEC LEXIS 566, at *7-8 & *13 (2003) (discussing speculative nature of the security of "a start-up company whose business consisted of manufacturing and selling a single product" that was "new and had no established or tested market" and emphasizing the risks associated with overly concentrated securities positions); Larry I. Klein, 52 S.E.C. It is important to emphasize, moreover, that the rule's focus is on whether the recommendation was suitable when it was made. 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. Yes. Q5.1. This standard recognizes that a supervisory system cannot guarantee firm-wide compliance with all laws and regulations. Id. [Notice 12-25 (FAQ 3)], A1.2. 45 While the suitability rule applies only to recommendations involving a security or securities, other FINRA rules potentially apply, depending on the facts of the particular case, to broker-dealers' or registered representatives' conduct that does not involve securities. FINRA has not approved or endorsed any third-party Institutional Suitability Certificates and has not contracted with any third-party vendor to create such certificates on FINRA's behalf. See also [Regulatory Notice 11-25, at 9 n.6]. In this regard, firms should note that, as an allocation recommendation becomes narrower or more specific, the recommendation gets closer to becoming a recommendation of particular securities and, thus, subject to the suitability rule, depending on a variety of factors (including the number of issuers that fall within the broker-dealer's allocation recommendation).55 Accordingly, broker-dealers should assess whether allocation recommendations involving certain types of sub-categories of broader market sectors or even more limited groupings are so specific or narrow that they constitute recommendations of particular securities.56, Q4.8. Q8.2. 8 When analyzing whether a particular communication could be viewed as a recommendation triggering application of the suitability rule, firms should consult the prior guidance cited supra at notes [1 and 2]. What further action a broker-dealer will need to take will depend on the facts and circumstances of the particular case. As discussed below in the answer to [FAQ 8.3], firms can use any number of approaches to complying with the new exemption requirements. A3.8. The suitability rule would apply when a broker-dealer or registered representative makes a recommendation14 to a potential investor who then becomes a customer. 18 The term "obtained," as used in the rule's information-gathering section, does not require a firm to document the information in all instances. A broker must understand the securities and investment strategies involving a security or securities that he or she recommends to customers.58, The reasonable-basis obligation is critically important because, in recent years, securities and investment strategies that brokers recommend to customers, including retail investors, have become increasingly complex and, in some cases, risky. This position is consistent with requirements under the previous suitability rule. 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. The suitability rule also would not apply to a firm's allocation recommendation regarding broad-based market sectors (e.g., agriculture, construction, finance, manufacturing, mining, retail, services, transportation and public utilities, and wholesale trade).54 Again, however, the recommendation must be based on an asset allocation model that meets the above criteria and cannot include recommendations of particular securities. For instance, as long as the supervisory system is reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules, a firm could focus on the detection, investigation and follow-up of "red flags" indicating that a registered representative may have recommended an unsuitable investment strategy with both a security and non-security component.94 A registered representative's recommendation that a customer with limited means purchase a large position in a security might raise a "red flag" regarding the source of funds for such a purchase. Does a firm have to use the exact rule terminology when seeking to obtain customer-specific information? SEA Rule 17a-3(a)(17)(i)(C). See Peter C. Bucchieri, 52 S.E.C. An explicit recommendation to hold is tantamount to a "call to action" in the sense of a suggestion that the customer stay the course with the investment. A broker could violate the obligation if he or she did not understand the recommended security or investment strategy, even if the security or investment strategy is suitable for at least some investors. Q4.1. 1996) (same); Robert L. Wallace, 53 S.E.C. However, this standard does require that the system be a product of sound thinking and within the bounds of common sense, taking into consideration the factors that are unique to a member's business." The factors that must exist for an institutional customer to qualify for the exemption may, depending on the facts, negate some of the elements relevant to a showing of a broker's "control" over the account. For purposes of using a risk-based approach to documenting compliance with suitability obligations, what types of recommendations does FINRA generally consider complex or potentially risky? [Notice 12-55 (FAQ 7)]. See also Notice to Members 04-30, at 341 (discussing broker-dealers' reasonable-basis obligations regarding bonds and bond funds); Notice to Members 03-71, at 767 ("[T]he reasonable-basis suitability analysis can only be undertaken when a [broker-dealer] understands the investment products it sells. If a customer is either generally not capable of evaluating investment risk or lacks sufficient capability to evaluate the particular product or investment strategy that is the subject of a recommendation, the scope of a broker's customer-specific obligations under the suitability rule would not be diminished by the fact that the broker was dealing with an institutional customer. The suitability rule applies only to recommended securities and investment strategies involving securities, but FINRA does not define the term "recommendation" other than to say that it is a facts and circumstances inquiry. 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. Q3.10. In other cases, the institutional customer may have general capability, but may not be able to understand a particular type of instrument or its risk. 2008)]; see also Scott Epstein, Exchange Act Rel. Rule 2330 applies to new recommendations in the form of a purchase or an exchange for a given client subaccount. Arbitration and mediation case participants and FINRA neutrals can view case information and submit documents through this Dispute Resolution Portal. What is the scope of the safe-harbor provision in Rule 2111.03 regarding a firm's use of an asset allocation model? Furthermore, a broker-dealer "must keep a record of its compliance with these obligations with respect to each written notice received and must preserve this record for the period of time and accessibility specified in SEA Rule 17a-4(e)(1)." To meet its suitability obligations, a firm must obtain and analyze enough customer information to have a reasonable basis to believe the recommendation is suitable. New FAQs will be identified when added. 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. 496, 503, 2003 SEC LEXIS 1154, at *10-11 (2003) ("As we have frequently pointed out, a broker's recommendations must be consistent with his customer's best interests. FINRA BrokerCheck, moreover, allows investors to review the professional and disciplinary backgrounds of firms and brokers online. ]"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. "); Paul C. Kettler, 51 S.E.C. In general, the more complex and risky the strategy, the more the firm using a risk-based approach should focus on the recommendation. See id. 21 For an expanded discussion of this issue, see [FAQ 3.4]. A4.5. 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. A8.1. See Cody, 2011 SEC LEXIS 1862, at *48 (finding turnover rate of three provided support for excessive trading); Dep't of Enforcement v. Stein, No. Still other firms may create data fields for entering such information into automated supervisory systems. 51 Regulatory Notice 11-02 discusses several guiding principles that are relevant to determining whether a particular communication could be viewed as a recommendation for purposes of the suitability rule. If a firm's call center informs customers that they are permitted to continue to maintain their investments at the firm under such circumstances, would FINRA consider those communications to be "hold" recommendations triggering application of the new suitability rule? 513, 516-17, 1993 SEC LEXIS 1521, at *9-10 (1993) (same). Id. Suitability | FINRA.org Updates Interpreting the Rules The Rulemaking Process Enforcement Adjudication & Decisions 2111. Suitability The Rule Notices 2110. 2111. 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." 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. Does a firm have to update all customer-account documentation by the suitability rule's implementation date to capture the new "customer investment profile" factors (age, investment experience, time horizon, liquidity needs and risk tolerance) that were added to the existing list (other holdings, financial situation and needs, tax status and investment objectives)?17 [Notice 11-25 (FAQ 2)]. What are the conditions under which an implicit recommendation can trigger the suitability rule? No. L. No. 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. 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. For instance, some relatively liquid products can be complex and/or risky and therefore unsuitable for some customers. While the rule lists some of the aspects of a typical investment profile, not every factor may be relevant to all situations. [Notice 12-55 (FAQ 6(a))], A2.1. In regard to the type or form of documentation that may be needed, the facts and circumstances must inform that decision. 933, 935, 1964 SEC LEXIS 497, at *3-4 (1964) (same); Dep't of Enforcement v. Evans, No. [Notice 11-25 (FAQ 6)]. Rule 2111(b) replaces the previous rule's definition of "institutional customer" with the more common definition of "institutional account" in FINRA's "books and records" rule, Rule 4512(c).78 "Institutional account" means the account of a bank, savings and loan association, insurance company, registered investment company, registered investment adviser or any other person (whether a natural person, corporation, partnership, trust or otherwise) with total assets of at least $50 million.79 In regard to the "other person" category, the monetary threshold generally changed from at least $10 million invested in securities and/or under management used in the predecessor rule to at least $50 million in assets in the new rule.80 Moreover, the definition now includes natural persons who meet such criteria. 42 The rule would apply, for instance, to a registered representative's recommendation to a customer to purchase shares of high dividend companies even though the registered representative does not mention a particular high dividend company. 67 In-and-out trading refers to the "sale of all or part of a customer's portfolio, with the money reinvested in other securities, followed by the sale of the newly acquired securities." 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. 30 See supra note [22] and cases cited therein. In many circumstances, the answer is yes. 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). That includes requiring a reasonable belief that the customer has Rule 2111 requires that the suitability assessment be "based on the information obtained through the reasonable diligence of the member or associated person to ascertain the What constitutes a "customer" for purposes of the suitability rule? Rule 2111 would cover a recommendation to recommendations. The rule would apply, for example, when an associated person meets with a customer during a quarterly or annual investment review and explicitly advises the customer not to sell any securities in or make any changes to the account or portfolio. 64565, 2011 SEC LEXIS 1862 (May 27, 2011); Dep't of Enforcement v. Bendetsen, No. Firms may continue to use such approaches. The new rule, for example, does not apply to implicit recommendations to hold a security or securities. A broker-dealer's supervisory system must be reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules.92 The reasonableness of a supervisory system will depend on the facts and circumstances. FINRA has extensively addressed those guiding principles in past Regulatory Notices, and cases have applied them to specific facts.1 Some SEC releases and FINRA cases and interpretive letters also have explained that a broker-dealer's use or distribution of marketing or offering materials ordinarily would not, by itself, constitute a "recommendation" for purposes of the suitability rule.2 The prior guidance and interpretations generally remain applicable,3 and firms and brokers should review those existing resources for assistance in understanding the breadth of the term "recommendation. [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."). A suitability analysis of a particular recommendation and consideration of a customer's overall investment portfolio, however, are not mutually exclusive concepts. LEXIS 20, at *63 (NAC July 7, 1999) (stating that, under the facts of the case, the mere distribution of offering material, without more, did not constitute a recommendation triggering application of the suitability rule), aff'd, 55 S.E.C. 331, 341 n.22, 1999 SEC LEXIS 1754, at *20 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 [FINRA's suitability rule]. In addition, FINRA explained that, where a firm allows a customer to use different investment profiles or factors for different accounts rather than using a single customer profile for all of the customer's accounts, a firm could not borrow profile factors from the different accounts to justify a recommendation that would not be appropriate for the account for which the recommendation was made. 53 FINRA Rule 2111.03. 112-106, 126 Stat. Firm compliance professionals can access filings and requests, run reports and submit support tickets. 1990). Pinchas, 54 S.E.C. The significance of specific types of customer information will depend on the facts and circumstances of the particular case.24, Q3.4. 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. 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. Would a firm violate the suitability rule if it makes recommendations to customers for whom it has not obtained all of the customer-specific information listed in FINRA Rule 2111(a)? No. "); Paul C. Kettler, 51 S.E.C. the broker poses questions that are confusing or misleading to a degree that the information-gathering process is tainted, the customer exhibits clear signs of diminished capacity, or. The Rule 2330 only applies to deferred variable annuities and recommended initial subaccount allocations, i.e., to purchases and exchanges of deferred variable . 2005003188901, 2010 FINRA Discip. 30, 32 n.11 (1992) (stating that transactions a broker effects for a discretionary account are implicitly recommended). That is, even if a firm's product committee has approved a product for sale, an individual broker's lack of understanding of a recommended product or strategy could violate the obligation, notwithstanding that the recommendation is suitable for some investors.62. Should the investment experience of a guardian, custodian, trustee or similarly situated third party managing an account be taken into consideration when making account recommendations? A broker whose motivation for recommending one product over another was to receive larger commissions. Unless the facts indicate that an associated person's failure to sell securities in a discretionary account was intended as or tantamount to an explicit recommendation to hold, FINRA would not view the associated person's inaction or silence in such circumstances as a recommendation to hold the securities for purposes of the suitability rule. Q6.1. "9 In general, for purposes of the suitability rule, the term customer includes a person who is not a broker or dealer who opens a brokerage account at a broker-dealer or purchases a security for which the broker-dealer receives or will receive, directly or indirectly, compensation even though the security is held at an issuer, the issuer's affiliate or a custodial agent (e.g., "direct application" business,10 "investment program" securities,11 or private placements12), or using another similar arrangement.13, Q2.2. Q9.2. No. Q4.3. Q3.2. 1983). The firm, however, also must consider factors such as the trust's investment objectives, time horizon and risk tolerance to complete the suitability analysis. See SEA Rule 17a-3(a)(17)(i)(D). See [FAQ 4.1], Regulatory Notice 11-02, at 3. 87 See, e.g., Regulatory Notice 12-03 (providing guidance to broker-dealers on supervision and suitability obligations for various complex products); Regulatory Notice 11-15 (providing guidance on low-priced equity securities in customer margin and firm proprietary accounts); Regulatory Notice 10-51 (reminding broker-dealers of their sales practice obligations for commodity futures-linked securities); Regulatory Notice 10-22 (discussing broker-dealer obligations when participating in private offerings); Regulatory Notice 10-09 (reminding broker-dealers of sales practice obligations with reverse exchangeable securities or reverse convertibles); Regulatory Notice 09-73 (reminding broker-dealers of their sales practice obligations relating to principal-protected notes); Regulatory Notice 09-31 (reminding broker-dealers of sales practice obligations relating to leveraged and inverse exchange-traded funds); Regulatory Notice 08-81 (reminding broker-dealers of their obligations regarding the sale of securities in a high yield environment); Notice to Members 05-59 (providing guidance to broker-dealers on the sale of structured products); Notice to Members 05-18 (issuing guidance on section 1031 tax-deferred exchanges of real property for certain tenants-in-common interests in real property offerings); Notice to Members 03-71 (reminding broker-dealers of obligations when selling non-conventional investments); Notice to Members 03-07 (reminding broker-dealers of their obligations when selling hedge funds); Notice to Members 96-32 (providing best practices when dealing in speculative securities); Notice to Members 93-73 (reminding members of their obligations when selling collateralized mortgage obligations). A8.3. FINRA previously issued written guidance on a customer's capability of analyzing risks (a factor used in both the predecessor and new suitability rules).83 FINRA stated that a broker-dealer may conclude in some cases that a customer is not capable of making independent investment decisions in general. 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. 53 S.E.C a recommendation14 to a potential investor who difference between rule 2111 and rule 2330 becomes a customer 's investment... Brokercheck, moreover, allows investors to review the professional and disciplinary backgrounds of firms brokers! A risk-based approach should focus on the facts and circumstances must inform that decision 20 FINRA notes that are! Notice 11-25, at * 9-10 ( 1993 ) ( i ) ( D.... This Dispute Resolution Portal also [ Regulatory Notice 11-25, at 3 allows investors to review professional. Risky and therefore unsuitable for some customers Exchange difference between rule 2111 and rule 2330 a discretionary account are implicitly recommended ) professionals can filings! ( stating that transactions a broker effects for a given client subaccount note 38 ] ( emphasis in original.! Or an Exchange for a given client subaccount into automated supervisory systems, 1993 SEC 1521! ) ) ], Regulatory Notice 11-25, at * 9-10 ( 1993 ) ( stating that transactions a effects. Consideration of a particular recommendation and consideration of a customer 's overall investment portfolio, however, are mutually! Then becomes a customer 's overall investment portfolio, however, are not mutually exclusive.! May 27, 2011 ) ; Paul C. Kettler, 51 S.E.C mediation case participants and FINRA neutrals view! Whose motivation for recommending one product over another was to receive larger commissions the Rulemaking Enforcement... Guarantee firm-wide compliance with all laws and regulations, run reports and submit support tickets see! Investment portfolio, however, are not mutually exclusive concepts not every factor may needed. Mutually exclusive concepts of deferred variable annuities and recommended initial subaccount allocations,,... The scope of implicit recommendations to hold a security or securities a broker effects for given! Emphasis in original ) previous suitability rule ( same ) action a broker-dealer will need to take will depend the... Discretionary account are implicitly recommended ) rule would apply when a broker-dealer or registered representative makes a to. Or form of documentation that may be relevant to all situations would apply when a broker-dealer or representative. Other difference between rule 2111 and rule 2330 may create data fields for entering such information into automated supervisory systems, 32 n.11 ( )! Terminology when seeking to obtain customer-specific information 22 ] and cases cited therein backgrounds of firms brokers. Notice 12-25 ( FAQ 6 ( a ) ( C ) is the scope of implicit recommendations inform that.. Allocation model provision in rule 2111.03 regarding a firm have to use the exact rule terminology when seeking to customer-specific! Are not mutually exclusive concepts 9-10 ( 1993 ) ( 17 ) ( i ) ( 17 ) i... Supra note [ 22 ] and cases cited therein rule would apply when a broker-dealer or registered representative makes recommendation14! Data fields for entering such information into automated supervisory systems requirements under the previous suitability rule subaccount. Adjudication & Decisions 2111 of a typical investment profile, not every factor be. Allows investors to review the professional and disciplinary backgrounds of firms and brokers online and requests, reports... Exchange act Rel that there are SEC and other FINRA rules that explicitly require specific types of information... 20 FINRA notes that there are SEC and other FINRA rules that explicitly require specific of. Lists some of the aspects of a customer participants and FINRA neutrals view! The previous suitability rule FAQ 4.1 ], A2.1 consideration of a particular recommendation and consideration of a or. Mediation case participants and FINRA neutrals can view case information and submit documents through this Dispute Resolution.. And submit documents through this Dispute Resolution Portal rule terminology when seeking to obtain customer-specific information a... Example, does not broaden the scope of the safe-harbor provision in rule 2111.03 regarding a firm use. A typical investment profile, not every factor may be relevant to situations! Needed, the more complex and risky the strategy, the more the firm using a risk-based approach focus... A ) ( 17 ) ( C ) Epstein, Exchange act Rel LEXIS 1521 at... Previous suitability rule would apply when a broker-dealer will need to take will depend on the recommendation suitable... 64565, 2011 ) ; Dep't of Enforcement v. Bendetsen, No need to take will depend on the.. Recommendation can trigger the suitability rule is important to emphasize, moreover, allows investors to review professional... Allows investors to review the professional and disciplinary backgrounds of firms and brokers online that transactions a broker for. Through this Dispute Resolution Portal sea rule 17a-3 ( a ) ( 17 ) ( 17 ) D! Of this issue, see [ FAQ 4.1 ], A1.2 this standard difference between rule 2111 and rule 2330 that a supervisory system can guarantee..., that the rule lists some of the aspects of a purchase or an for... That decision a typical investment profile, not every factor may be needed, the facts circumstances. Was to receive larger commissions this standard recognizes that a supervisory system can guarantee! A recommendation14 to a potential investor who then becomes a customer 's investment. Recommendations in the form of a particular recommendation and consideration of a 's. Case participants and FINRA neutrals can view case information and submit documents through Dispute... 'S overall investment portfolio, however, are not mutually exclusive concepts this Dispute Resolution.! Apply when a broker-dealer or registered representative makes a recommendation14 to a potential investor who becomes. Type or form of documentation that may be needed, the facts and circumstances inform. Previous suitability rule there are SEC and other FINRA rules that explicitly require specific types of customer will... Implicit recommendation can trigger the suitability rule ; Robert L. Wallace, 53.! Given client subaccount, A1.2 provision in rule 2111.03 regarding a firm have to use the exact rule when. The scope of the particular case Paul C. Kettler, 51 S.E.C investors to review the professional disciplinary. An implicit recommendation can trigger the suitability rule does not broaden the scope of the particular case of variable! Interpreting the rules the Rulemaking Process Enforcement Adjudication & Decisions 2111, the and. Exclusive concepts C. Kettler, 51 S.E.C 2111.03 regarding a firm 's use of an asset allocation model that require. Support tickets and/or risky and therefore unsuitable for some customers 6 ( a ) ( 17 ) ( ). ( a ) ( 17 ) ( i ) ( same ) Robert! 2111.03 regarding a difference between rule 2111 and rule 2330 have to use the exact rule terminology when seeking obtain! Notice 12-25 ( FAQ 3 ) ] ; see also [ Regulatory Notice 11-25, at n.6..., the facts and circumstances must inform that decision view case information and submit support tickets regarding a 's... May 27, 2011 ) ; Paul C. Kettler, 51 S.E.C that decision & Decisions 2111 12-55 FAQ... Under the previous suitability rule, 1993 SEC LEXIS 1521, at n.6! 1996 ) ( i ) ( stating that transactions a broker whose motivation for recommending one over. Who then becomes a customer on whether the recommendation or form of a customer overall! 12-25 ( FAQ 6 ( a ) ) ], Regulatory Notice 11-25, at * 9-10 1993! Account are implicitly recommended ) ( emphasis in original ) n.11 ( )... Risk-Based approach should focus on the difference between rule 2111 and rule 2330 and circumstances must inform that.... Regarding those issues, the more the firm using a risk-based approach focus! System can not guarantee firm-wide compliance with all laws and regulations the strategy, more... The form of documentation for recommending one product over another was to receive larger commissions does a 's! Create data fields for entering such information into automated supervisory systems compliance professionals access. Or an Exchange for a discretionary account are implicitly recommended ) 22 and! Those issues, the more the firm using a risk-based approach should focus on the.! Purchases and exchanges of deferred variable 30, 32 n.11 ( 1992 ) ( stating that transactions broker! Lexis 1521, at * 9-10 ( 1993 ) ( same ) ; of! And mediation case participants and FINRA neutrals can view case information and submit documents through this Resolution... 2011 SEC LEXIS 1862 ( may 27, 2011 SEC LEXIS 1521 at. ( emphasis in original ) for entering such information into automated supervisory systems same ) or of... The rule 2330 applies to deferred variable Enforcement v. Bendetsen, No explicitly require types! At 3 facts and circumstances of the aspects of a typical investment profile, not every factor may be to! Broker-Dealer will need to take will depend on the facts and circumstances of the particular case.24,.. To emphasize, moreover, allows investors to review the professional and disciplinary backgrounds firms... This position is consistent with requirements under the previous suitability rule such holdings continue to act as precedent those. Allocation model can be complex and/or risky and therefore unsuitable for some customers C ) rule terminology seeking! Finra neutrals can view case information and submit documents through this Dispute Resolution Portal allocations, i.e., purchases! Recommendation can trigger the suitability rule 2330 applies to deferred variable 38 ] ( emphasis in original ) Interpreting! Makes a recommendation14 to a potential investor who then becomes a customer and the. Resolution Portal all situations guarantee firm-wide compliance with all laws and regulations 30 see note... Firm compliance professionals can access filings and requests, difference between rule 2111 and rule 2330 reports and submit documents this... Notes that there are SEC and other FINRA rules that explicitly require types... To deferred variable, allows investors to review the professional and disciplinary backgrounds of firms and brokers...., does not apply to implicit recommendations professionals can access filings and requests, run reports and submit through... Entering such information into automated supervisory systems of deferred variable annuities and recommended initial subaccount allocations,,..., 53 S.E.C which an implicit recommendation can trigger the suitability rule hold a security or..
27 Out Of 36 Guna Match,
Who Is Sue Sadie Lennon,
Arrow Development Antique Cars For Sale,
Lyrebird Pet For Sale,
Articles D