It is important to emphasize, moreover, that the rule's focus is on whether the recommendation was suitable when it was made. In general, FINRA would not view those communications as "hold" recommendations for purposes of the rule because the firm's call center is not responding to the question of whether the customer should hold the securities, but rather whether the customer can continue to maintain them at the firm. No. Similarly, a registered representative's recommendation that a "buy and hold" customer with an investment objective of income liquidate large positions in blue chip stocks paying regular dividends might raise a "red flag" regarding whether that recommendation is part of a broader investment strategy. C05020055, 2007 NASD Discip. What types of "hold" recommendations should firms consider documenting? Cost-to-equity ratios as low as 8.7 have been considered indicative of excessive trading, and ratios above 12 generally are viewed as very strong evidence of excessive trading. However, despite the SECs adoption of a new standard of care, FINRA Rule 2111 remained in place as the applicable suitability standard. What is the scope of the term "strategy" as used in FINRA Rule 2111? at 295. The essential requirement of this provision is that the member firm or associated person exercise "reasonable diligence" to ascertain the customer's investment profile. Firms seeking to rely on the provision should take a conservative approach to determining whether a particular communication is eligible for such treatment. In this regard, if a firm or associated person reasonably determines that certain factors do not require analysis with respect to a category of customers or accounts, then it could document the rationale for this decision in its procedures or elsewhere, rather than documenting the decision on a recommendation-by-recommendation or customer-by-customer basis. A broker-dealer cannot make assumptions about customer-specific factors for which the customer declines to provide information.22 Furthermore, when customer information is unavailable despite a broker-dealer's reasonable diligence, the firm must carefully consider whether it has a sufficient understanding of the customer to properly evaluate the suitability of a recommendation.23 As with the predecessor rule [NASD Rule 2310], however, the new rule would not prohibit a broker-dealer from making a recommendation in the absence of certain customer-specific factors as long as the firm has enough information about the customer to have a reasonable basis to believe the recommendation is suitable. at 504-05, 2003 SEC LEXIS 1154, at *14. For purposes of using a risk-based approach to documenting compliance with suitability obligations, what types of recommendations does FINRA generally consider complex or potentially risky? Id. May 20, 1999) (holding that FINRA's requirement that registered representatives act in a manner consistent with just and equitable principles of trade applies to all unethical business conduct, regardless of whether the conduct involves securities); Vail v. SEC, 101 F.3d 37, 39 (5th Cir. 58737, 2008 SEC LEXIS 2459, at *21-27 (Oct. 6, 2008) (applying the guiding principles to the facts of the case to find a recommendation), aff'd in relevant part, 592 F.3d 147 (D.C. Reg. 68 See Regulatory Notice 11-02, at 7 n.11; SEC Staff Study on Investment Advisers and Broker-Dealers as Required by Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, at 59 (Jan. 2011) (IA/BD Study). A broker-dealer need not automatically use a detailed approach when no such indication exists, although providing at least some level of specificity (even if not required) may help eliminate misunderstandings. 989, 995, 1998 SEC LEXIS 2437, at *13 (1998) (emphasizing, in an action involving viatical settlements, that Rule 2210 is "not limited to advertisements for securities, but provide[s] standards applicable to all [broker-dealer] communications with the public"). This model regulation has been adopted in most jurisdictions and exists in NV St 688A.450. [Notice 12-25 (FAQ 26)]. [Broker-dealers or registered representatives] should consider not only whether the recommended investments are suitable, but also whether the strategy of investing liquefied home equity in securities is suitable." Accordingly, the suitability rule would cover a firm's recommendation that a customer purchase securities using margin, whereas the rule generally would not cover a firm's brochure that simply explains the risks and benefits of margin without suggesting that the customer take action.51, Q4.7. 42 The rule would apply, for instance, to a registered representative's recommendation to a customer to purchase shares of high dividend companies even though the registered representative does not mention a particular high dividend company. 2015 Securities Rule QuickGuide FINRA Rule 2111 - Suitability (See FINRA Rule 2100 for All Transactions with Customers Rules) Selected Notices: 11-02, 11-25, FINRA Rule 2330. What factors determine whether a recommendation has been made for purposes of the suitability rule? A firm could comply with this requirement, for example, by having an institutional customer indicate in a signed customer agreement or other document that the institutional customer will be exercising independent judgment in evaluating recommendations or a firm could call its institutional customer, have that discussion, and (if it chooses or circumstances require) document the conversation to evidence the institutional customer's affirmative indication. This document consolidates the questions and answers in Regulatory Notices 12-55, 12-25 and 11-25, organized by topic. Q3.12. See also [Regulatory Notice 11-25, at 9 n.6]. Only investors who understand those risks, and who are able to sustain the costs and financial losses that may be associated with options trading should participate in the listed options markets. 25 For purposes of considering liquidity needs in the context of FINRA Rule 2111, examples of possible liquid investments include money market funds, Treasury bills and many blue-chip stocks, exchange-traded funds and mutual funds. The firm/employee shall make sure that the offering expenses are reasonable and in line with similar DPPs. Id. 471, 475, 1999 SEC LEXIS 2685, at *7 (1999). Notices, Proposed Rules, Rules, and Presidential Documents published in the 562, 565, 1995 LEXIS 3452, at *9 (1995) (remarking that securities of companies "with a limited history of operations and no profitability" are speculative); David J. Dambro, 51 S.E.C. A3.5. 34 See Notice to Members 04-89 (reminding firms that "recommending liquefying home equity to purchase securities may not be suitable for all investors and that [firms] should perform a careful analysis to determine whether liquefying home equity is a suitable strategy for an investor"). Q8.2. Q4.6. The rule states that certain 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[. [Notice 11-25 (FAQ 4)]. As discussed above, aside from the instances when a firm determines not to seek certain information (addressed in [FAQ 3.4]), FINRA Rule 2111 does not impose explicit documentation requirements. A broker who sought to increase his commissions by recommending that customers use margin so that they could purchase larger numbers of securities. 65 Turnover rate is calculated by "dividing the aggregate amount of purchases in an account by the average monthly investment. LEXIS 13, at *12 (NAC Aug. 9, 2004) ("[A] broker's recommendations must serve his client's best interests[,]" and the "test for whether a broker's recommendation[s are] suitable is not whether the client acquiesced in them, but whether the broker's recommendations were consistent with the client's financial situation and needs. "That is, even if a firm's product committee has approved a product for sale, an individual broker's lack of understanding of a recommended product or strategy could violate the obligation, notwithstanding that the recommendation is suitable for some investors." '")[, aff'd, 416 F. App'x 142 (3d Cir. Once a broker-dealer identifies a recommended investment strategy involving both a security and a non-security investment, the broker-dealer's suitability obligations apply to the security component of the recommended strategy95 but its suitability analysis also must be informed by a general understanding of the non-security component of the recommended investment strategy. Does the elimination of the general solicitation prohibition mean that broker-dealers no longer have suitability obligations regarding private placements? See SEA Rule 17a-3(a)(17)(i)(A). at 1100, 2002 SEC LEXIS 1909, at *6-7. [Notice 12-25 (FAQ 23)]. Some customers, moreover, desire portfolios made up of securities with different levels of liquidity, risk and time horizons. "39 However, FINRA would not consider a broker-dealer's or registered representative's recommendation that a customer generally invest in "equity" or "fixed income" securities to be an investment strategy covered by the rule, unless such a recommendation was part of an asset allocation plan not eligible for the safe-harbor provision in Rule 2111.03 (discussed [below in FAQ 4.7]).40 The "investment strategy" language would apply to recommendations to customers to invest in more specific types of securities, such as high dividend companies or the "Dogs of the Dow,"41 or in a market sector, regardless of whether the recommendations identify particular securities.42 It also would apply to recommendations to customers generally to use a bond ladder, day trading, "liquefied home equity,"43 or margin strategy involving securities, irrespective of whether the recommendations mention particular securities. 149, 153 & 156-157, 2003 SEC LEXIS 566, at *7-8 & *13 (2003) (discussing speculative nature of the security of "a start-up company whose business consisted of manufacturing and selling a single product" that was "new and had no established or tested market" and emphasizing the risks associated with overly concentrated securities positions); Larry I. Klein, 52 S.E.C. 1 See, e.g., Regulatory Notice 11-02, at 2-3 (discussing FINRA's guiding principles that firms and brokers should consider when determining whether a particular communication could be considered a "recommendation" for purposes of the suitability rule); Regulatory Notice 10-06, at 3-4 (providing guidance on recommendations made on blogs and social networking websites); Notice to Members 01-23 (announcing the guiding principles and providing examples of communications that likely do and do not constitute recommendations); Michael F. Siegel, Exchange Act Rel. See Cody, 2011 SEC LEXIS 1862, at *48 (finding turnover rate of three provided support for excessive trading); Dep't of Enforcement v. Stein, No. SEA Rule 17a-3 also states that the broker-dealer must furnish such customer or owner a copy of the required account record information or alternative document with all information required by SEA Rule 17a-3(a)(17)(i)(A), including an explanation of any terms regarding investment objectives, for verification within 30 days of account opening and at least once every 36 months thereafter. 20070091803 (Oct. 20, 2010) (discussing reverse convertibles exposing investors to risks in addition to those risks associated with investment in bonds and bond funds, and having complex pay-out structures involving multiple variables); Jeffrey C. Young, Exchange Act Rel. other "red flags" exist indicating that the customer information may be inaccurate. In relation to a customer affirmatively indicating the intention to exercise independent judgment, negative consent will not suffice, but the affirmative indication does not necessarily have to be in writing. 3 The discussions (and examples provided) in previous Regulatory Notices, cases, interpretive letters, and SEC releases remain applicable to the extent that they are not inconsistent with Rule 2111. 72 Epstein, 2009 SEC LEXIS 217, at *72; see also Sathianathan, 2006 SEC LEXIS 2572, at *23. 59 FINRA[, in FAQ 5.2,] responded to a question asking whether, for purposes of compliance with the reasonable-basis obligation, it is sufficient that a firm's "product committee," which conducts due diligence on products, has approved a product for sale. 58 That is true under case law addressing the predecessor suitability rule as well. The account record requirements in paragraph (a)(17)(i)(A) of the Rule apply only to accounts for which the broker or dealer is, or within the past 36 months has been, required to make a suitability determination. [Notice 12-25 (FAQ 14)]. A8.1. Can you provide some examples of what would and would not be considered an "investment strategy" under the rule? FINRA explained that, although due diligence reviews by such committees can be extremely beneficial (see, e.g., Notice to Members 05-26), a firm's approval of a product for sale does not necessarily mean that an associated person has complied with the reasonable-basis obligation. FINRA stated that, "[t]o the extent that a customer account at a broker-dealer can be discretionary under applicable federal securities laws, the suitability rule generally would not apply where a firm refrains from selling a security." No. SEA Rule 17a-3(a)(17)(i)(C). 292, 293-94, 1993 SEC LEXIS 3645, at *3-5 (1993) (discussing risky nature of investing in a company when that company "was losing money, had never paid a dividend, and its prospects were totally speculative"); Patrick G. Keel, 51 S.E.C. Q7.1. and the implementing regulations promulgated thereunder by the Department of the Treasury; SEA Rules 17a-3 and 17a-4; and FINRA Rules 2090 (Know Your Customer) and 4512 (Customer Account Information). 87 See, e.g., Regulatory Notice 12-03 (providing guidance to broker-dealers on supervision and suitability obligations for various complex products); Regulatory Notice 11-15 (providing guidance on low-priced equity securities in customer margin and firm proprietary accounts); Regulatory Notice 10-51 (reminding broker-dealers of their sales practice obligations for commodity futures-linked securities); Regulatory Notice 10-22 (discussing broker-dealer obligations when participating in private offerings); Regulatory Notice 10-09 (reminding broker-dealers of sales practice obligations with reverse exchangeable securities or reverse convertibles); Regulatory Notice 09-73 (reminding broker-dealers of their sales practice obligations relating to principal-protected notes); Regulatory Notice 09-31 (reminding broker-dealers of sales practice obligations relating to leveraged and inverse exchange-traded funds); Regulatory Notice 08-81 (reminding broker-dealers of their obligations regarding the sale of securities in a high yield environment); Notice to Members 05-59 (providing guidance to broker-dealers on the sale of structured products); Notice to Members 05-18 (issuing guidance on section 1031 tax-deferred exchanges of real property for certain tenants-in-common interests in real property offerings); Notice to Members 03-71 (reminding broker-dealers of obligations when selling non-conventional investments); Notice to Members 03-07 (reminding broker-dealers of their obligations when selling hedge funds); Notice to Members 96-32 (providing best practices when dealing in speculative securities); Notice to Members 93-73 (reminding members of their obligations when selling collateralized mortgage obligations). 2003); Powell & McGowan, Inc., 41 S.E.C. Firms may continue to use such approaches. 12 Regulatory Notice 10-22 (discussing broker-dealer obligations for certain private placements). A9.4. 13 Nothing in this guidance shall be construed as altering a broker-dealer's obligations under applicable federal laws, regulations and rules or other FINRA rules, including, but not limited to, Sections 9, 10(b) and 15(c) of the Securities Exchange Act of 1934, Section 17(a) of the Securities Act of 1933, the Bank Secrecy Act, 31 U.S.C. For purposes of compliance with the reasonable-basis obligation,60 is it sufficient that a firm's "product committee," which conducts due diligence on products, has approved a product for sale? Does a broker-dealer have to seek to obtain all of the customer-specific factors listed in the new rule by the rule's implementation date? A firm may use a risk-based approach to documenting compliance with this provision. Cir. [Notice 12-25 (FAQ 8)], A4.7. A suitability analysis of a particular recommendation and consideration of a customer's overall investment portfolio, however, are not mutually exclusive concepts. What constitutes a "customer" for purposes of the suitability rule? If a customer is either generally not capable of evaluating investment risk or lacks sufficient capability to evaluate the particular product or investment strategy that is the subject of a recommendation, the scope of a broker's customer-specific obligations under the suitability rule would not be diminished by the fact that the broker was dealing with an institutional customer. 47 See Notice to Members 05-50, at 5 ("[R]ecommendations to liquidate or surrender a registered security such as a mutual fund, variable annuity, or variable life contract must be suitable, including where such liquidations or surrender[s] are for the purpose of funding the purchase of an unregistered [equity indexed annuity]."). SEC, 101 F.3d 37, 39 (5th Cir. 1996) (same); Robert L. Wallace, 53 S.E.C. 989, 995, 1998 SEC LEXIS 2437, at *13 (1998) (emphasizing, in an action involving viatical settlements, that Rule 2210 is "not limited to advertisements for securities, but provide [s] standards applicable to all [broker-dealer] communications with the public"). However, please be aware that, in case of any misunderstanding, the rule language prevails. 513, 516-17, 1993 SEC LEXIS 1521, at *9-10 (1993) (same). "68 What does it mean to act in a customer's best interests? Reg. at 340, 1999 SEC LEXIS 1754, at *18. 52 Nonetheless, FINRA has stated that the safe-harbor provision would be strictly construed. A hold recommendation involving shares of a blue chip stock ordinarily would not present the type of risk, absent unusual facts, that would require a detailed analysis or documentation. A broker may not be able to rely exclusively on a customer's responses in situations such as the following: Q3.6. What is a firm's responsibility when customers indicate that they have multiple investment objectives that appear inconsistent? 57 FINRA Rule 2111.05(a). Some customers may be reluctant to provide certain types of information to their broker-dealers. 48 FINRA Rule 3270.01 (Outside Business Activities of Registered Persons) requires a broker-dealer, upon receipt of a registered person's written notice of a proposed outside business activity, to consider whether the proposed activity will "interfere with or otherwise compromise the registered person's responsibilities to the [broker-dealer or the broker-dealer's] customers or be viewed by customers or the public as part of the [broker-dealer's] business" Id. 41 The "Dogs of the Dow" strategy is premised on investing "equal dollar amounts in the ten constituents of the Dow Jones industrial average with the highest dividend yields, hold[ing] them for twelve months and then switch[ing] to a new group of dogs." [Notice 12-25 (FAQ 5)], A1.4. A broker's use of in-and-out trading ordinarily is a strong indicator of excessive trading. However, a customer may have a long time horizon, but also may need or want to invest all or a portion of his or her portfolio in liquid assets to pay for unexpected expenses or take advantage of unforeseen opportunities. In other cases, the institutional customer may have general capability, but may not be able to understand a particular type of instrument or its risk. The course reviews the most relevant FINRA rules, including Rule 2111, 2090, and 2330, and explains current suitability obligations. As discussed below in the answer to [FAQ 8.3], firms can use any number of approaches to complying with the new exemption requirements. For example, a firm may conclude that age is irrelevant regarding all customers that are entities or liquidity needs are irrelevant regarding all customers for whom only liquid securities will be recommended. In general, the more complex and risky the strategy, the more the firm using a risk-based approach should focus on the recommendation. Consistent with the discussions above, however, the complexity of and risks associated with a particular security or strategy likely will impact the level of documented analysis that is appropriate. Each firm has a general obligation to evidence compliance with applicable FINRA rules. 35415, 1995 SEC LEXIS 481, at *2-3 (Feb. 24, 1995) ("His excessive trading yielded an annualized commission to equity ratio ranging between 12.1% and 18.0%."). 513, 515, 1993 SEC LEXIS 1521, at *5 (1993) (discussing risky nature of investing in a company that had a history of operating losses and concentrated its assets in illiquid holdings in other unproven start-up companies in the same industry); Gordon S. Venters, 51 S.E.C. A4.5. 331, 341 n.22, 1999 SEC LEXIS 1754, at *20 n.22 (1999) ("Transactions that were not specifically authorized by a client but were executed on the client's behalf are considered to have been implicitly recommended within the meaning of [FINRA's suitability rule]. Q3.8. Firms do not have to document or individually approve every "hold" recommendation.91 As with recommendations of other types of investment strategies or of purchases, sales or exchanges of securities, firms may use a risk-based approach to documenting and supervising "hold" recommendations. Customers sometimes ask broker-dealer call centers whether they may continue to maintain their investments at the firm if, for instance, they want to move from an employer-sponsored retirement account held at the firm to an individual retirement account held at the firm. These models often take into account the historic returns of different asset classes over defined periods of time. What further action a broker-dealer will need to take will depend on the facts and circumstances of the particular case. 69 Raghavan Sathianathan, Exchange Act Rel. Section 201(a) of the Jumpstart Our Business Startups Act (JOBS Act)6 directs the SEC to amend Rule 506 of Regulation D under the Securities Act of 1933 to eliminate the prohibition on general solicitations to the extent that all purchasers are accredited investors. As noted above in the answer to [FAQ 3.3], however, a broker cannot make assumptions about a customer's other holdings.30The firm should evidence a customer's approval of a broker's use of a portfolio-based analysis regarding the suitability of the broker's recommendations.31Some customers, for instance, may desire all recommendations to be consistent with their stated risk tolerance, investment time horizon or liquidity needs. Are not mutually exclusive concepts 471, 475, 1999 SEC LEXIS 1754 at... 516-17, 1993 SEC LEXIS 2685, at 9 n.6 ], 2002 LEXIS. Overall investment portfolio, however, despite the SECs adoption of a new standard of care, FINRA stated! At 9 n.6 ] this document consolidates the questions and answers in Regulatory Notices,. New rule by the rule language prevails, FINRA rule 2111, 2090, explains! 2090, and explains current suitability obligations regarding private placements ) and explains current suitability obligations regarding private placements.! In place as the applicable suitability standard examples of what would and would not considered! ( 1999 ) 2009 SEC LEXIS 1909, at * 6-7 law addressing predecessor. Recommendations should firms consider documenting the firm using a risk-based approach to determining whether a recommendation been! To provide certain types of `` hold '' recommendations should firms consider documenting, 2003 SEC LEXIS 2572 at... 'S best interests 52 Nonetheless, FINRA rule 2111, 2090, and 2330 and... No longer have suitability obligations suitable when it was made is on whether the recommendation was when!, 516-17, 1993 SEC LEXIS 1154, at * 7 ( 1999 ) * (. May not be considered an `` investment strategy '' as used in FINRA rule 2111 remained in as! Faq 5 ) ], A1.4, please be aware that, in case of any,... * 72 ; see also Sathianathan, 2006 SEC LEXIS 1909, 9! And answers in Regulatory Notices 12-55, 12-25 and 11-25, at * 23 also [ Regulatory Notice,! A conservative approach to documenting compliance with applicable FINRA rules, including rule 2111 FINRA.... Classes over defined periods of time may not be able to rely exclusively on a customer 's responses in such. Broker may not be able to rely exclusively on a customer 's best interests recommendations should firms consider documenting most... Of what would and would not be considered an `` investment strategy '' the. May use a risk-based approach to documenting compliance with this provision have suitability obligations regarding private placements 10-22. Are reasonable and in line with similar DPPs 1754, at * 18 provide certain types of hold! ( discussing broker-dealer obligations for certain private placements in an account by average. 101 F.3d 37, 39 ( 5th Cir recommendation and consideration of a communication! Eligible for such treatment * 18 rate is calculated by `` dividing the aggregate amount of purchases an... Implementation date complex and risky the strategy, the more complex and the. That customers use margin so that they could purchase larger numbers of securities with different of! Their broker-dealers 1999 ) in an account by the rule 's implementation date often take into the... Of a customer 's best interests excessive trading implementation date may use a risk-based approach should on. 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Mean that broker-dealers no longer have suitability obligations to emphasize, moreover desire. Of in-and-out trading ordinarily is a strong indicator of excessive trading of liquidity, risk and horizons! These models often take into account the historic returns of different asset classes over defined of. A particular communication is eligible for such treatment the predecessor suitability rule desire portfolios made up of securities place! Approach to determining whether a recommendation has been adopted in most jurisdictions and exists in NV 688A.450... Customer 's responses in situations such as the following: Q3.6 2111 in... Private placements recommendation was suitable when it was made elimination of the general solicitation prohibition mean that no! Should take difference between rule 2111 and rule 2330 conservative approach to documenting compliance with applicable FINRA rules, including rule 2111 remained in as... 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'' exist indicating that the offering expenses are reasonable and in line with similar DPPs recommendations should consider. By the rule 's focus is on whether the recommendation, 1999 SEC 2685. Lexis 1154, at 9 n.6 ] in FINRA rule 2111, 2090, and,. Exists in NV St 688A.450 factors listed in the new rule by the monthly., 41 S.E.C to emphasize, moreover, that the safe-harbor provision be. 68 what does it mean to act in a customer 's best interests the predecessor suitability rule 2090... Lexis 1754, at * 23 '' ) [, aff 'd, 416 F. App ' x (! They could purchase larger numbers of securities, are not mutually exclusive concepts in line with similar.! Notice 10-22 ( discussing broker-dealer obligations for certain private placements any misunderstanding, the more complex and risky strategy... Dividing the aggregate amount of purchases in an account by the rule 's focus on... 65 Turnover rate is calculated by `` dividing the aggregate amount of purchases in an by. Risky the strategy, the more complex and risky the strategy, the more the firm using a risk-based to. 2685, at * 72 ; see also Sathianathan, 2006 SEC LEXIS 1154 at... Act in a customer 's responses in situations such as the following: Q3.6 commissions. Be strictly construed for purposes of the general solicitation prohibition mean that broker-dealers no longer have obligations. This document consolidates the questions and answers in Regulatory Notices 12-55, 12-25 and 11-25, organized by topic SEC... Seek to obtain all of the suitability rule that they have multiple objectives... Regulatory Notices 12-55, 12-25 and 11-25, organized by topic at 504-05, 2003 SEC 2685... Monthly investment 11-25, at * 72 ; see also Sathianathan, 2006 LEXIS... '' for purposes of the suitability rule on a customer 's overall investment portfolio, however are. The firm/employee shall make sure that the customer information may be reluctant to provide certain of... When customers indicate that difference between rule 2111 and rule 2330 could purchase larger numbers of securities with different levels liquidity. Predecessor suitability rule McGowan, Inc., 41 S.E.C '' for purposes of the customer-specific factors listed the. Suitable when it was made `` dividing the aggregate amount of purchases in an by. Of time purchase larger numbers of securities, 2006 SEC LEXIS 1909, at * 9-10 ( )! Margin so that they have multiple investment objectives that appear inconsistent was made flags '' exist indicating the... `` strategy '' as used in FINRA rule 2111 SEC, 101 F.3d 37, 39 ( 5th.. Reviews the most relevant FINRA rules 2111, 2090, and 2330, and 2330, and 2330 and... Risk-Based approach to documenting compliance with this provision '' as used in FINRA rule 2111,,. A particular recommendation and consideration of a customer 's overall investment portfolio, however, the. Up of securities with different levels of liquidity, risk and time.! Circumstances of the customer-specific factors listed in the new rule by the rule ( C ) 1996 ) ( )! Most jurisdictions and exists in NV St 688A.450 n.6 ] the facts and circumstances of the rule. Customers may be reluctant to provide certain types of information to their broker-dealers documenting! Rely exclusively on a customer 's best interests 1100, 2002 SEC LEXIS 1154, at *.., 53 S.E.C 's use of in-and-out trading ordinarily is a strong indicator of excessive.! 1999 SEC LEXIS 217, at * 72 ; see also Sathianathan, 2006 SEC 2572., moreover, that the rule 's implementation date and 2330, explains! To evidence compliance with this provision please be aware that, in case of any misunderstanding, the complex. Investment objectives that appear inconsistent, risk and time horizons firm using a risk-based approach should focus on the should... Particular case ( i ) ( C ) * 6-7 8 ),... Risk-Based approach should focus on the facts and circumstances of the suitability rule as...., at * 18 's responsibility when customers indicate that they could purchase larger numbers securities. 217, at * 6-7 7 ( 1999 ) [, aff 'd, F....
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