• • • Supplementary Material: --------------
.01 Reasonable Basis Suitability Obligation. Rule 211 requires a capital acquisition broker to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. In general, what constitutes reasonable diligence will vary depending on, among other things, the complexity of and risks associated with the security or investment strategy and the capital acquisition broker's or associated person's familiarity with the security or investment strategy. A capital acquisition broker's or associated person's reasonable diligence must provide the capital acquisition broker or associated person with an understanding of the potential risks and rewards associated with the recommended security or strategy. The lack of such an understanding when recommending a security or strategy violates the suitability rule.
.02 Institutional Investor Exemption. Rule 211(b) provides an exemption to customer-specific suitability regarding institutional investors if the conditions delineated in that paragraph are satisfied. With respect to having to indicate affirmatively that it is exercising independent judgment in evaluating the capital acquisition broker's or associated person's recommendations, an institutional investor may indicate that it is exercising independent judgment on a transaction-by-transaction basis, on an asset-class-by- asset-class basis, or in terms of all of its potential transactions.
.03 Regulation Best Interest. This Rule shall not apply to recommendations subject to SEA Rule 15l-1 ("Regulation Best Interest").
|Amended by SR-FINRA-2020-007 eff. June 30, 2020.
Adopted by SR-FINRA-2015-054 eff. April 14, 2017.
Selected Notice: 16-37, 20-18.