In November 2010, the SEC approved FINRA Rule 2111 (Suitability), which became effective on July 9, 2012. In May 2012, FINRA issued Regulatory Notice 12-25, which provides guidance on the rule in a FAQ format. The attached regulatory notice further addresses two issues discussed in Notice 12-25: the scope of the terms “customer” (for example, the term includes a potential customer) and “investment strategy” (for example, does a recomendation to hold constitute an “investment strategy”). The notice also discusses how the FINRA Rules relate to recommendations involving non-securities.
Lofchie Comment: There is nothing particularly surprising in the Notice. Supervisors and compliance professions should be sure to incorporate the material in their training programs for sales persons.