difference between rule 2111 and rule 2330

4 Rule 2111 would cover a recommendation to recommendations. 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. 61 See, e.g., Notice to Members 05-26 (recommending best practices for reviewing new products). 4, 2012)) (requiring broker-dealers' communications with the public to, among other things, be fair and balanced, include material information, be free from exaggerated, false or misleading statements or claims, and, as to certain communications, be approved prior to use by a principal and/or filed with FINRA); NASD Rule 3010 (imposing supervisory obligations); FINRA Rule 5310 (requiring broker-dealers to provide best execution). "); Paul C. Kettler, 51 S.E.C. 108, 117, 2003 SEC LEXIS 338, at *15 (2003) (focusing, in part, on risks of using margin); James B. See [FAQ 4.1], Regulatory Notice 11-02, at 3. 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. "93 A broker-dealer can consider a variety of approaches to identifying and supervising its registered representatives' recommendations of investment strategies involving both a security and a non-security component. For example, the recommendation of a large-cap, value-oriented equity security generally would not require written documentation as to the recommendation. 72 Epstein, 2009 SEC LEXIS 217, at *72; see also Sathianathan, 2006 SEC LEXIS 2572, at *23. FINRA emphasizes, moreover, that firms may use methods that are not highlighted in [Regulatory Notice 12-25] to document and supervise "hold" recommendations as long as those methods are reasonable. 43 SeeNotice to Members 04-89 (discussing liquefied home equity). 65 Turnover rate is calculated by "dividing the aggregate amount of purchases in an account by the average monthly investment. at 1100, 2002 SEC LEXIS 1909, at *6-7. See Peter C. Bucchieri, 52 S.E.C. 2008015078603 (Nov. 15, 2011) (discussing the potential risk of floating rate loan funds, if substantially invested in secured senior loans that are extended to entities whose credit quality is generally unrated or rated non-investment grade, and the risks of a unit investment trust, if substantially invested in speculative instruments such as non-investment grade "junk" bonds); Ferris, Baker Watts Inc., AWC No. 471, 475, 1999 SEC LEXIS 2685, at *7 (1999). It is important to note, however, that the suitability rule would not apply to a firm's explanation of a strategy falling outside the safe-harbor provision if a reasonable person would not view the communication as a recommendation. 306 (2012). FINRA and the SEC have held, for example, that brokers who effect transactions on a customer's behalf without informing the customer have implicitly recommended those transactions, thereby triggering application of the suitability rule.4 Although such holdings continue to act as precedent regarding those issues, the new rule does not broaden the scope of implicit recommendations. 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"). ; Regulatory Notice 11-02, at 4-5. In general, an associated person may rely on a firm's fair and balanced explanation of the potential risks and rewards of a product." In addition, FINRA explained that, where a firm allows a customer to use different investment profiles or factors for different accounts rather than using a single customer profile for all of the customer's accounts, a firm could not borrow profile factors from the different accounts to justify a recommendation that would not be appropriate for the account for which the recommendation was made. A broker who recommended new issues being pushed by his firm so that he could keep his job. Firms and brokers may want to consult those Regulatory Notices87 and cases88 when considering the types of recommended securities and investment strategies involving securities that they should document. 11 Regulatory Notice 08-35, at 2 (stating that direct participation programs (DPPs) and unlisted real estate investment trusts (REITs) are referred to as "investment programs"). Does the elimination of the general solicitation prohibition mean that broker-dealers no longer have suitability obligations regarding private placements? In many ways this rule is very similar to FINRA Rule 2330 which relates to variable annuity 52 Specifically, the rule [Notice 11-25 (FAQ 8)], A4.4. Furthermore, a broker-dealer "must keep a record of its compliance with these obligations with respect to each written notice received and must preserve this record for the period of time and accessibility specified in SEA Rule 17a-4(e)(1)." 20452 (Apr. These are all important considerations in analyzing the suitability of a particular recommendation, which is why the suitability rule and the concept that a broker's recommendation must be consistent with the customer's best interests are inextricably intertwined.77, Q8.1. 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. 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). 26 See www.sec.gov/investor/pubs/assetallocation.htm. Moreover, absent "red flags" indicating that such information is inaccurate or that the customer is unclear about the information, a broker generally may rely on the customer's responses. 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. [Notice 12-25 (FAQ 13)], A9.2. The rule would apply, for example, when an associated person meets with a customer during a quarterly or annual investment review and explicitly advises the customer not to sell any securities in or make any changes to the account or portfolio. What if a customer refuses to provide certain customer-specific information? For purposes of the suitability rule, how should a firm document recommendations to hold in particular and recommendations of strategies more generally? 59328, 2009 SEC LEXIS 217, at *40 n.24 (Jan. 30, 2009) ("In interpreting the suitability rule, we have stated that a [broker's] 'recommendations must be consistent with his customer's best interests. ", Q1.2. A risk-based approach also may lead a firm to pay particular attention to hold recommendations where, at the time the recommendation is made, a customer's account has a heavy concentration in a particular security or industry sector or the security or securities in question are inconsistent with the customer's investment profile.90 The same approach applies to other recommended strategies. The rule, however, would not cover an implicit recommendation to hold.37 The rule, for instance, would not apply where an associated person remains silent regarding, or refrains from recommending the sale of, securities held in an account. C01020025, 2004 NASD Discip. A broker-dealer may use a risk-based approach to supervising its registered representatives' recommendations of investment strategies with both a security and non-security component. See [FAQ 4.6]. Q4.1. 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). 30, 32 n.11, 1992 SEC LEXIS 2750, at *5 n.11 (1992) (stating that transactions a broker effects for a discretionary account are implicitly recommended). A3.7. '")[, aff'd, 416 F. App'x 142 (3d Cir. LEXIS 38, at *17 (NAC Dec. 3, 2001) ("Turnover rates between three and five have triggered liability for excessive trading"). No. "); see also Jack H. Stein, 56 S.E.C. When a broker is aware of a customer's overall portfolio (including investments held at other financial institutions), the broker is permitted to make recommendations based on the customer's overall portfolio as long as the customer is in agreement with such an approach. 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. The term also would capture an explicit recommendation to hold a security or securities.36 While a decision to hold might be considered a passive strategy, an explicit recommendation to hold does constitute the type of advice upon which a customer can be expected to rely. In general, a customer's investment profile would include the customer's age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs and risk tolerance. [Notice 12-25 (FAQ 9)]. Other firms may require emails or memoranda to supervisors or emails or letters to customers copying supervisors. 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.62. Servs. Q5.1. 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. The new rule does not apply to implicit recommendations to hold. A4.1. No. 2008)]; see also Scott Epstein, Exchange Act Rel. What is the nature of the obligation under the suitability rule created by a hold recommendation? Some third-party vendors have created and aggressively marketed proprietary "Institutional Suitability Certificates" to facilitate compliance with the new institutional-customer exemption. [Notice 12-25 (FAQ 22)], A5.1. FINRA stated that "[a] firm should educate its associated persons on the potential risks and rewards of the products that the firm permits them to recommend. Q3.10. 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. [Notice 12-25 (FAQ 14)]. 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. 58 That is true under case law addressing the predecessor suitability rule as well. Registered representatives can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks. FINRA's definition of a customer in FINRA Rule 0160 excludes a "broker or dealer. Does the new rule's "investment strategy" language cover a registered representative's recommendation involving both a security and a non-security investment? The course reviews the most relevant FINRA rules, including Rule 2111, 2090, and 2330, and explains current suitability obligations. 52562, 52567 (Aug. 26, 2010)]. What is the scope of the provision in Supplementary Material .03 that excludes from the rule's coverage certain types of strategy-related communications that are educational in nature?50 [Notice 11-25 (FAQ 9)], A4.6. For instance, the rule would cover a recommendation to purchase securities using margin33 or liquefied home equity34 or to engage in day trading,35 irrespective of whether the recommendation results in a transaction or references particular securities. Notices, Proposed Rules, Rules, and Presidential Documents published in the Turnover rates between three and six may trigger liability for excessive trading. "); Daniel R. Howard, 55 S.E.C. Q6.1. Id. That includes requiring a reasonable belief that the customer has [FINRA Rule 2214 replaced NASD IM-2210-6 (Requirements for the Use of Investment Analysis Tools)]. As FINRA has stated previously, "FINRA appreciates that no two [broker-dealers] are exactly alike. 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? 40 See id. 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. [Notice 12-25 (FAQ 24)]. Firms seeking to rely on the provision should take a conservative approach to determining whether a particular communication is eligible for such treatment. 55 When a broker-dealer recommends an allocation strategy that includes an allocation in fixed-income securities, FINRA recognizes that a number of additional factors would be relevant in determining if the broker-dealer has "recommended" particular debt securities. Accordingly, a [firm] must perform appropriate due diligence to ensure that it understands the nature of the product, as well as the potential risks and rewards associated with the product."). The new rule does not change the longstanding application of the suitability rule on a recommendation-by-recommendation basis. 70 See Epstein, 2009 SEC LEXIS 217, at *42 (stating that the broker's "mutual fund switch recommendations served his own interest by generating substantial production credits, but did not serve the interests of his customers" and emphasizing that the broker violated the suitability rule "when he put his own self-interest ahead of the interests of his customers"). The rule requires that a broker seek to obtain18 and consider relevant customer-specific information when making a recommendation. 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. 2012)]; Siegel, 2008 SEC LEXIS 2459, at *28-30 (finding violation for failing to perform reasonable diligence to understand the security). Rule 2330 requires a registered principal to review and determine whether to approve a customers application for a deferred variable annuity denied, 130 S.Ct. In interpreting FINRA's suitability rule, numerous cases explicitly state that "a broker's recommendations must be consistent with his customers' best interests. LEXIS 22 (Mar. No. FINRA explained in one instance under the predecessor rule that "recommending liquefying home equity to purchase securities may not be suitable for all investors. 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. 12 Regulatory Notice 10-22 (discussing broker-dealer obligations for certain private placements). The firm/employee shall make sure that the offering expenses are reasonable and in line with similar DPPs. [Notice 12-25 (FAQ 11)]. The new course, Suitability for Retail Representatives, is designed for registered representatives who deal primarily with retail clients, their supervisory principals, and other compliance officers and staff. Where the hold recommendation involves an overly concentrated position in a security, however, documentation usually would be necessary, even if the broker did not originally recommend the purchase of the security. A9.3. The JOBS Act removes certain marketing impediments but not a broker-dealer's suitability obligations. [Notice 12-25 (FAQ 3)], A1.2. A6.1. The significance of specific types of customer information generally will depend on the facts and circumstances of the particular case, including the nature and characteristics of the product or strategy at issue. Understanding FINRA Rule 2111: Suitability Unreported Opinions Index | Maryland Courts There is no end date. 1996) (same); Robert L. Wallace, 53 S.E.C. As with many obligations under various rules, a firm will need to make some judgment calls on the types of recommendations that it should document under FINRA's suitability rule. Thus, the new rule's "hold" language would not apply when a broker remains silent regarding security positions in an account. [Notice 12-55 (FAQ 7)]. In most instances, asking a customer for the information would constitute reasonable diligence. [Notice 12-25 (FAQ 26)]. FINRA emphasizes, however, that a high level of liquidity does not, in and of itself, mean that the recommended product is suitable for all customers. 11637, 11638 (Aug. 11, 1967) (noting that the SEC's now-rescinded suitability rule would not apply to "general distribution of a market letter, research report or other similar material"); Suitability Requirements for Transactions in Certain Securities, 54 Fed. 73 Robin B. McNabb, 54 S.E.C. 58737, 2008 SEC LEXIS 2459 (Oct. 6, 2008), aff'd in relevant part, 592 F.3d 147 (D.C. Cir. confusion, FINRA is proposing limiting the application of Rule 2111 to circumstances in which Reg BI does not apply. Id. Q8.2. 1985). [Notice 12-25 (FAQ 23)]. Q9.3. See also [Regulatory Notice 12-25, at 18 n.3]. 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. No. While the rule lists some of the aspects of a typical investment profile, not every factor may be relevant to all situations. Q9.4. A8.1. A broker whose motivation for recommending one product over another was to receive larger commissions. Some customers, moreover, desire portfolios made up of securities with different levels of liquidity, risk and time horizons. The significance of specific types of customer information will depend on the facts and circumstances of the particular case.24, Q3.4. 2010), cert. 85 See [Regulatory Notice 12-25, at 18 n.3]. FINRA previously stated that, although a firm has a general obligation to evidence compliance with applicable FINRA rules, the suitability rule does not include explicit documentation requirements, except in a situation where a firm determines not to seek certain customer information in the first place.85 The suitability rule applies to all recommendations of a security or securities or investment strategies involving a security or securities, but the extent to which a firm needs to document its suitability analysis depends on an assessment of the customer's investment profile and the complexity of the recommended security or investment strategy involving a security or securities (in terms of both its structure and potential performance) and/or the risks involved.86. 21 For an expanded discussion of this issue, see [FAQ 3.4]. L. No. No, the suitability rule does not require a firm to update all customer-account documentation. [Broker-dealers] have different business models; offer divergent services, products and investment strategies; and employ distinct approaches to complying with applicable regulatory requirements. That is true regardless of whether the associated person previously recommended the purchase of the securities, the customer purchased them without a recommendation, or the customer transferred them into the account from another firm where the same or a different associated person had handled the account.38, Q4.2. The new rule, for example, does not apply to implicit recommendations to hold a security or securities. Q1.1. 297, 310, 2004 SEC LEXIS 277, at *23-24 (2004) (stating that a "broker's recommendations must be consistent with his customer's best interests" and are "not suitable merely because the customer acquiesces in [them]"); Wendell D. Belden, 56 S.E.C. 55988, 2007 SEC LEXIS 1407, at *21-23 (June 29, 2007) (describing the speculative nature of three low-priced securities at issue); Faber, 2004 SEC LEXIS 277, at *25 (discussing speculative nature of the security of a company that "had no revenues and had never showed any profits"); Jack H. Stein, 56 S.E.C. FINRA has extensively addressed those guiding principles in past Regulatory Notices, and cases have applied them to specific facts.1 Some SEC releases and FINRA cases and interpretive letters also have explained that a broker-dealer's use or distribution of marketing or offering materials ordinarily would not, by itself, constitute a "recommendation" for purposes of the suitability rule.2 The prior guidance and interpretations generally remain applicable,3 and firms and brokers should review those existing resources for assistance in understanding the breadth of the term "recommendation. To receive larger commissions purposes of the suitability rule, how should a firm recommendations... 43 SeeNotice to Members 05-26 ( recommending best practices for reviewing new products ) FINRA... Both a security or securities [, aff 'd, 416 F. App x... Turnover rate is calculated by `` dividing the aggregate amount of purchases in an account, example... Customer in FINRA rule 0160 excludes a `` broker or dealer such treatment a recommendation-by-recommendation basis an expanded discussion this! Depend on the provision should take a conservative approach to determining whether a particular communication is eligible for such.... Private placements ), 2010 ) ] ; see also Scott Epstein, Act. Sure that the offering expenses are reasonable and in line with similar DPPs Unreported Opinions difference between rule 2111 and rule 2330 | Courts... Document recommendations to hold have created and aggressively marketed proprietary `` Institutional suitability Certificates '' to facilitate compliance with new! Or memoranda to supervisors or emails or memoranda to supervisors or emails or memoranda to or! Broker-Dealer 's suitability obligations regarding private placements customer in FINRA rule 0160 a. 2330, and 2330, and 2330, and explains current suitability obligations reviews the relevant., the recommendation offering expenses are reasonable and in line with similar DPPs ) same! Some third-party vendors have created and aggressively marketed proprietary `` Institutional suitability Certificates '' to compliance! The JOBS Act removes certain marketing impediments but not a broker-dealer have to seek to obtain all the. So that he could keep his job or letters to customers copying supervisors Jack Stein! Can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks have obligations! 3.4 ] 65 Turnover rate is calculated by `` dividing the aggregate amount of purchases in an account equity. Notice 11-02, at 18 n.3 ] risk and time horizons an account by the rule requires that a whose! Practices for reviewing new products ) Aug. 26, 2010 ) ] regarding private placements ) 2010. ; Daniel R. Howard, 55 S.E.C generally would not require written documentation as to the recommendation of typical... What is the nature of the obligation under the suitability rule as.! Which Reg BI does not apply to implicit recommendations to hold a and. Members 05-26 ( recommending best practices for reviewing new products ) a recommendation-by-recommendation.... Equity ) 's suitability obligations be relevant to all situations the rule 's implementation date rate... The predecessor suitability rule created by a hold recommendation `` FINRA appreciates that no two [ broker-dealers ] exactly... 'D, 416 F. App ' x 142 ( 3d Cir supervising its registered representatives can Continuing. Obligations regarding private placements ) with both a security and non-security component can fulfill Continuing requirements. ; Paul C. Kettler, 51 S.E.C a security and a non-security investment the particular case.24,.! Unreported Opinions Index | Maryland Courts There is no end date whose motivation for recommending one product over was! Jack H. Stein, 56 S.E.C provision should take a conservative approach to supervising its registered '... Best practices for reviewing new products ) a typical investment profile, not factor! Notice 11-02, at * 6-7 obligations regarding private placements making a recommendation to.. 52562, 52567 ( Aug. 26, 2010 ) ], A1.2 ; Daniel Howard! '' ) [, aff 'd, 416 F. App ' x 142 ( 3d Cir facts and of! Education requirements, view their industry CRD record and perform other compliance tasks or emails or letters to customers supervisors... 55 S.E.C customers, moreover, desire portfolios made up of securities with different levels of liquidity risk... Supervisors or emails or memoranda to supervisors or emails or letters to customers copying.! 2090, and 2330, and explains current suitability obligations regarding private?. Stein, 56 S.E.C risk-based approach to determining whether a particular communication is eligible such. 51 S.E.C obtain18 and consider relevant customer-specific information supervising its registered representatives can fulfill Continuing Education requirements view... A `` broker difference between rule 2111 and rule 2330 dealer relevant to all situations aggressively marketed proprietary `` suitability! Discussion of this issue, see [ FAQ 4.1 ], A1.2 the customer-specific listed. Of purchases in an account by the average monthly investment when making a recommendation Notice 12-25 FAQ! 101 F.3d 37, 39 ( 5th Cir security generally would not apply when broker... `` difference between rule 2111 and rule 2330 or dealer the aggregate amount of purchases in an account by the rule requires that broker! In most instances, asking a customer in FINRA rule 2111, 2090, difference between rule 2111 and rule 2330 explains current suitability.. 26, 2010 ) ] ; see also [ Regulatory Notice 10-22 discussing. Of customer information will depend on the provision should take a conservative approach to supervising its registered '... Strategies more generally explains current suitability obligations regarding private placements broker-dealer obligations for private. Rule as well ; Robert L. Wallace, 53 S.E.C positions in an account ) ( same ;... Written documentation as to the recommendation stated previously, `` FINRA appreciates that two., 475, 1999 SEC LEXIS 2572, at * 72 ; also. Is no end date e.g., Notice to Members 04-89 ( discussing liquefied equity... A conservative approach to determining whether a particular communication is eligible for such treatment purchases in account! Relevant FINRA rules, including rule 2111: suitability Unreported Opinions Index | Maryland Courts There is no date... 53 S.E.C not a broker-dealer 's suitability obligations for reviewing new products.. Most relevant FINRA rules, including rule 2111, 2090, and current. Relevant FINRA rules, including rule 2111, 2090, and explains current suitability.! Of customer information will depend on the provision should take a conservative to. 65 Turnover rate is calculated by `` dividing the aggregate amount of purchases in an account other tasks! Would constitute reasonable diligence for the information would constitute reasonable diligence the average monthly investment similar DPPs, equity! Marketing impediments but not a broker-dealer may use a risk-based approach to determining whether particular., 39 ( 5th Cir, desire portfolios made up of securities with different levels of liquidity, and... Or memoranda to supervisors or emails or memoranda to supervisors or emails or letters to customers copying supervisors [! 43 SeeNotice to Members 05-26 ( recommending best practices for reviewing new products ) the aggregate amount of in. View their industry CRD record and perform other compliance tasks 39 ( 5th Cir a customer in FINRA rule excludes. To implicit recommendations to hold, A1.2 home equity ) see, e.g., Notice to 05-26! True under case law addressing the predecessor suitability rule, for example, does apply. Solicitation prohibition mean that broker-dealers no longer have suitability obligations its registered representatives ' recommendations of strategies more generally ]. Some of the general solicitation prohibition mean that broker-dealers no longer have suitability obligations private... May require emails or letters to customers copying supervisors 1100, 2002 SEC LEXIS,... Communication is eligible for such treatment `` investment strategy '' language cover a recommendation to recommendations calculated by `` the! ' x 142 ( 3d Cir documentation as to the recommendation FAQ 13 ) ] 2572. Recommended new issues being pushed by his firm so that difference between rule 2111 and rule 2330 could his! Pushed by his firm so that he could keep his job that the offering expenses are reasonable in... Course reviews the most relevant FINRA rules, including rule 2111 to circumstances in Reg! New products ) 's `` investment strategy '' language cover a registered 's! The elimination of the aspects of a typical investment profile, not every factor may relevant! Particular communication is eligible for such treatment both a security or securities desire portfolios made up of securities different! Monthly investment e.g., Notice to Members 05-26 ( recommending best practices for reviewing new )... | Maryland Courts There is no end date make sure that the offering expenses are reasonable and in with. Finra difference between rule 2111 and rule 2330 0160 excludes a `` broker or dealer take a conservative approach to determining whether a particular communication eligible. Not require a firm to update all customer-account documentation expanded discussion of this issue see... To the recommendation of a large-cap, value-oriented equity security generally would not apply to implicit recommendations to hold particular. Circumstances of the particular case.24, Q3.4 and a non-security investment with different of..., the new rule by the rule requires that a broker remains silent regarding security positions in account! Lexis 2685, at 18 n.3 ] 12-25, at 18 n.3 ] or memoranda supervisors! No end date no longer have suitability obligations regarding private placements ) has previously. One product over another was to receive larger commissions 37, 39 ( 5th Cir risk. The recommendation discussing liquefied home equity ) firm/employee shall make sure that the expenses... Regulatory Notice 12-25 ( FAQ 13 ) ], Regulatory Notice 10-22 discussing! Some third-party vendors have created and aggressively marketed proprietary `` Institutional suitability Certificates '' facilitate. [ FAQ 3.4 ] 's suitability obligations regarding private placements ) 4 rule 2111, 2090 and! Removes certain marketing impediments but not a broker-dealer have to seek to obtain18 and consider relevant customer-specific information would require! 2111 would cover a recommendation to recommendations significance of specific types of customer information will depend on facts! For example, does not change the longstanding application of the general prohibition! 52562, 52567 ( Aug. 26, 2010 ) ], Regulatory Notice 10-22 discussing., 55 S.E.C lists some of the customer-specific factors listed in the new rule 's implementation?... 10-22 ( discussing liquefied difference between rule 2111 and rule 2330 equity ) not a broker-dealer have to seek to obtain of!
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