Regulatory Notice 16-19

FINRA Issues Guidance Regarding the Use of Stop Orders During Volatile Market Conditions

Summary

FINRA encourages firms to review their practices regarding stop (or stop-loss) orders, with an emphasis on educating investors regarding the risks and benefits of stop orders and special considerations around the use of stop orders during volatile market conditions. To accomplish this, firms should consider, among other things, providing targeted training to registered representatives regarding the risks associated with stop orders and, where appropriate, making alternative recommendations to meet customer objectives. Firms that allow customers to enter stop orders directly online should ensure that they prominently provide clear and comprehensive disclosures to customers at the time of order entry. Firms should also consider implementing systemic safeguards around the use of stop orders.

Questions regarding this Notice should be directed to:

  • Patrick Geraghty, Vice President, Market Regulation, at (240) 386-4973; or
  • Racquel Russell, Associate General Counsel, Office of General Counsel, at (202) 728-8363.