Regulatory Notice 08-82
FINRA Reminds Firms of Their Sales Practice Obligations with Regard to Cash Alternatives
FINRA is issuing this Notice to remind firms of their obligations in the sale of investments as alternatives to cash holdings.1 This Notice provides guidance to firms concerning the requirements to:
- avoid overstating a product's similarities to a cash holding and provide balanced disclosure of the risks and returns associated with a particular product;
- conduct adequate due diligence to understand the features of a product;
- conduct appropriate suitability analyses;
- monitor market and economic conditions that may cause the description of an investment as a cash alternative to become inaccurate or misleading, and adopt procedures reasonably designed to ensure that the firm responds to those changing conditions; and
- train registered persons regarding the features, risks and suitability of these products.
Questions concerning this Notice should be directed to Angela C. Goelzer, Associate Vice President and Counsel, at (202) 728-8120.
1 Regulatory Notice 08-81, also issued December 16, 2008, addresses firms' sales practice obligations with regard to the sale of securities in a high-yield environment.