FINRA: Guidance on FINRA’s Suitability Rule

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.

 

Click here to view notice in full (links externally to FINRA website).
See also: FINRA’s Suitability webpage.

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