• • • Supplementary Material: --------------
.01 General Principles. Implicit in all member and associated person relationships with customers and others is the fundamental responsibility for fair dealing. Sales efforts must therefore be undertaken only on a basis that can be judged as being within the ethical standards of FINRA rules, with particular emphasis on the requirement to deal fairly with the public. The suitability rule is fundamental to fair dealing and is intended to promote ethical sales practices and high standards of professional conduct.
.02 Disclaimers. A member or associated person cannot disclaim any responsibilities under the suitability rule.
.03 Recommended Strategies. The phrase "investment strategy involving a security or securities" used in this Rule is to be interpreted broadly and would include, among other things, an explicit recommendation to hold a security or securities. However, the following 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:
.04 Customer's Investment Profile. A member or associated person shall make a recommendation covered by this Rule only if, among other things, the member or associated person has sufficient information about the customer to have a reasonable basis to believe that the recommendation is suitable for that customer. The factors delineated in Rule 2111(a) regarding a customer's investment profile generally are relevant to a determination regarding whether a recommendation is suitable for a particular customer, although the level of importance of each factor may vary depending on the facts and circumstances of the particular case. A member or associated person shall use reasonable diligence to obtain and analyze all of the factors delineated in Rule 2111(a) unless the member or associated person has a reasonable basis to believe, documented with specificity, that one or more of the factors are not relevant components of a customer's investment profile in light of the facts and circumstances of the particular case.
.05 Components of Suitability Obligations. Rule 2111 is composed of three main obligations: reasonable-basis suitability, customer-specific suitability, and quantitative suitability.
.06 Customer's Financial Ability. Rule 2111 prohibits a member or associated person from recommending a transaction or investment strategy involving a security or securities or the continuing purchase of a security or securities or use of an investment strategy involving a security or securities unless the member or associated person has a reasonable basis to believe that the customer has the financial ability to meet such a commitment.
.07 Institutional Investor Exemption. Rule 2111(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 member's or associated person's recommendations, an institutional customer may indicate that it is exercising independent judgment on a trade-by-trade basis, on an asset-class-by-asset-class basis, or in terms of all potential transactions for its account.
Amended by SR-FINRA-2014-016 eff. May 1, 2014.
Amended by SR-FINRA-2013-001 eff. Feb. 4, 2013.
Adopted by SR-FINRA-2010-039 and amended by SR-FINRA-2011-016 and SR-FINRA-2012-027 eff. July 9, 2012.
Selected Notices: 11-02, 11-25, 12-25, 12-55.
- Regulatory Notice 18-13April 20, 2018
- Regulatory Notice 17-32October 16, 2017
- Regulatory Notice 17-16April 12, 2017
- Regulatory Notice 17-13April 10, 2017
- Regulatory Notice 16-02January 11, 2016
- Regulatory Notice 15-34October 02, 2015
- Regulatory Notice 15-32September 08, 2015
- Regulatory Notice 15-31August 26, 2015
- Regulatory Notice 15-29August 10, 2015
- Regulatory Notice 15-23June 19, 2015
- Regulatory Notice 14-33August 14, 2014
- Regulatory Notice 14-05February 03, 2014
- Regulatory Notice 14-18April 30, 2014
- Regulatory Notice 14-20May 07, 2014
- Regulatory Notice 13-29September 20, 2013
- Guidance, Notice, Regulatory NoticeApril 30, 2014
- Guidance, Notice, Regulatory NoticeSeptember 25, 2013
- Guidance, Notice, Regulatory NoticeOctober 31, 2013
- Guidance, Notice, Regulatory NoticeDecember 30, 2013
- Guidance, Notice, Regulatory NoticeDecember 10, 2012
- Notice, Regulatory Notice, GuidanceJanuary 17, 2012
- Guidance, Notice, Regulatory NoticeMay 18, 2012
- Guidance, Notice, Regulatory NoticeMay 18, 2011
No Results Found
- April 03, 2019