Earlier this month, we held a webinar discussing FINRA Rule 2111 (New Suitability Rule), led by Benjamin J. Biard, Esq., a Partner at Winget Spadafora Schwartzberg LLP. Biard provided practical and specific advice on how to comply with the new suitability rule and avoid future litigation under the new rule.
The rule 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.
According to FINRA, a 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, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.
The three components of suitability obligations are:
- Reasonable Basis Suitability;
- Customer Specific Suitability; and
- Quantitative Suitability.
These categories are geared at determining whether certain investments are appropriate for different types of clients, and provide standard guidelines for that process.
For more information or to access a recording of this webinar, visit our online webinar section (member login required).