Sunday, December 16, 2012

FINRA Guidance on Suitability Rules

FINRA issued Regulatory Notice 12-55 in December 2012 to clarify rules regarding investor suitability for FINRA-member firms and their registered persons.

The notice states, "FINRA Rule 2111 requires, in part, that a broker-dealer or registered representative '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 customer’s investment profile."

The document contains relevant Q&A regarding the definition of a customer and the scope of this rule.

Regulatory Notice 12-25 titled Additional Guidance on FINRA’s New Suitability Rule - Implementation Date: July 9, 2012 discusses the rule in detail.

AdvisorAssist Analysis:
RIAs must also take suitability serious. This is an increasing deficiency item with the regulators and found through AdvisorAssist client reviews. Documentation and routine check-ins with the client are required.

If you have any questions regarding this topic, please email us at


Post a Comment