Skip to main content

For updates and guidance related to COVID-19 / Coronavirus, click here.


Suitability obligations are critical to ensuring investor protection and promoting fair dealings with customers and ethical sales practices. FINRA Rule 2111 governs general suitability obligations, while certain securities are covered under other rules that may contain additional requirements. FINRA Rule 2111 does not apply to recommendations subject to SEA Rule 15l-1 (Regulation Best Interest). Please see the topic page on SEC Regulation Best Interest for information on Reg BI.

FINRA Rule 2111 requires that a firm or associated person have a reasonable basis to believe a recommended transaction or investment strategy involving a security or securities is suitable for the customer. This is based on the information obtained through reasonable diligence of the firm or associated person to ascertain the customer’s investment profile.

The rule states that the 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 [and] risk tolerance,” among other information. A broker’s “recommendation,” which is based on the facts and circumstances of a particular case, is the triggering event for application of the rule.

Brokers must have a firm understanding of both the product and the customer, according to Rule 2111. The lack of such an understanding itself violates the suitability rule.

Suitability Obligations

Rule 2111 lists the three main suitability obligations for firms and associated persons.

  • Reasonable-basis suitability requires a broker to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors.  Reasonable diligence must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.
  • Customer-specific suitability requires that a broker, based on a particular customer’s investment profile, has a reasonable basis to believe that the recommendation is suitable for that customer. The broker must attempt to obtain and analyze a broad array of customer-specific factors to support this determination.
  • Quantitative suitability requires a broker with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile.

Contact OGC

FINRA's Office of General Counsel (OGC) staff provides broker-dealers, attorneys, registered representatives, investors and other interested parties with interpretative guidance relating to FINRA’s rules. Please see Interpreting the Rules for more information.

OGC staff contacts:
Jim Wrona and Meredith Cordisco
1735 K Street, NW
Washington, DC 20006
(202) 728-8000

  • FINRA Amends Its Suitability, Non-Cash Compensation and Capital Acquisition Broker (CAB) Rules in Response to Regulation Best Interest
  • Sales Practice Obligations With Respect to Oil-Linked Exchange-Traded Products
  • FINRA Requests Comment on Proposed Amendments to the Quantitative Suitability Obligation Under FINRA Rule 2111
  • FINRA Filing Requirements and Review of Regulation A Offerings
  • FINRA Highlights Examination Approaches, Common Findings and Effective Practices for Complying With its Suitability Rule
  • Guidance on FINRA's Suitability Rule
  • Additional Guidance on FINRA's New Suitability Rule
  • Guidance on Social Networking Websites and Business Communications
  • New Implementation Date for and Additional Guidance on the Consolidated FINRA Rules Governing Know-Your-Customer and Suitability Obligations
  • SEC Approves Consolidated FINRA Rules Governing Know-Your-Customer and Suitability Obligations
  • Obligation of Broker-Dealers to Conduct Reasonable Investigations in Regulation D Offerings
  • FINRA Reminds Firms of Their Obligations Relating to Senior Investors and Highlights Industry Practices to Serve these Customers
  • Member Obligations with Respect to the Sale of Existing Variable Life Insurance Policies to Third Parties
  • NASD Recommends Best Practices for Reviewing New Products
  • NASD Issues Guidance on Section 1031 Tax-Deferred Exchanges of Real Property for Certain Tenants-in-Common Interests in Real Property Offerings
  • NASD Alerts Members to Concerns When Recommending or Facilitating Investments of Liquefied Home Equity
  • NASD Reminds Firms of Sales Practice Obligations In Sale of Bonds and Bond Funds
  • NASD Reminds Members of Obligations When Selling Hedge Funds
  • Suitability Rule And Online Communications
  • Clarification Of Members' Suitability Responsibilities Under NASD Rules With Special Emphasis On Member Activities In Speculative And Low-Priced Securities
  • Members Reminded To Use Best Practices When Dealing In Speculative Securities
  • FAQ
    The following frequently asked questions (FAQs) provide guidance on FINRA Rule 2111 (Suitability). This document consolidates the questions and answers in Regulatory Notices 12-55, 12-25 and 11-25, organized by topic.
  • 2019 Exam Findings Report
    Currently, FINRA’s suitability rule establishes obligations that are central to promoting ethical sales practices and high standards of professional conduct.2 FINRA Rule 2111 (Suitability) establishes three primary obligations for firms and their associated persons: (1) reasonable-basis suitability, (2) customer-specific suitability and (3) quantitative suitability.
    October 16, 2019
  • 2018 Exam Findings Report
    FINRA Rule 2111 (Suitability) establishes a fundamental responsibility for firms and associated persons to deal with customers fairly1 and is composed of three main obligations: (1) reasonable-basis suitability; (2) customer-specific suitability; and (3) quantitative suitability. FINRA continues to observe unsuitable recommendations by associated persons to retail investors as well as deficiencies in some firms’ supervisory systems for registered representatives’ activities.
    December 07, 2018
  • Targeted Examination Letter
    FINRA’s Member Regulation department is conducting a review with respect to products linked to the CBOE’s Volatility Index (VIX). The review will focus on the supervisory processes followed by firms to identify and mitigate sales practice risks associated with recommendations to non-institutional purchasers of VIX-linked products.
    April 09, 2018
  • 2017 Exam Findings Report

    FINRA Rule 2111 states 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.” In addition, FINRA Rule 3110 obligates firms to establish and maintain a system to

    December 01, 2017
  • Interpretive Letter
    Request for Interpretive Guidance on FINRA Rule 2111 (Suitability) in Relation to EB-5 Program Securities Transactions
    August 26, 2013
  • Interpretive Letter
    Staff clarification of NASD Notice to Members 96-60 regarding a member's suitability obligation under NASD Rule 2310 with respect to certain investment company transactions.
    March 04, 1997
  • Interpretive Letter
    Staff clarification of NASD Notice to Members 96-60 regarding a member's suitability obligation under NASD Rule 2310.
    January 23, 1997
  • Investor Alert
    This Investor Alert focuses on a type of call center called a customer advisory center. It is a center that is staffed by securities professionals who may provide financial planning services, sell securities products, and receive commissions or other financial incentives for doing so. These centers have become common and, in some instances, can be sales-orientated.
  • Investor Alert
    FINRA is reissuing this Alert because of concern—reflected in a recent enforcement action—that some investors may be the recipients of misleading information regarding certain public non-traded REITS. Some investors may also receive recommendations to purchase these products without adequate investigation by the firm or individual broker to determine whether these or similar investments are suitable.
  • Investor Alert
    Reverse convertibles are debt obligations of the issuer that are tied to the performance of an unrelated security or basket of securities. Although often described as debt instruments, they are far more complex than a traditional bond and involve elements of options trading. FINRA is issuing this alert to inform investors of the features and risks of reverse convertibles.
  • Investor Alert
    Buying mutual funds through a broker or other investment professional usually means choosing among different mutual fund classes. The only differences among these classes is how much you will pay in expenses and how much your broker will be paid for selling you the fund.