[See infra note 38] (emphasis in original). 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. Note: With this guidance, FINRA attempts to present information in a format that is easily understandable. See, e.g., FAQ [1.1] (discussing the term "recommendation" and citing various resources that explain the guiding principles that firms could use when analyzing whether a communication constitutes a recommendation); Regulatory Notice 11-02, at 2-3 (discussing FINRA's guiding principles); 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. [Notice 12-55 (FAQ 7)]. 30, 32 n.11 (1992) (stating that transactions a broker effects for a discretionary account are implicitly recommended). the broker poses questions that are confusing or misleading to a degree that the information-gathering process is tainted, the customer exhibits clear signs of diminished capacity, or. However, if the associated person remains uncertain about the potential risks and rewards of a product or has reason to believe that the firm failed to address a particular issue or has done so in an incomplete or inaccurate manner, then the associated person would need to engage in further inquiry before recommending the product. WebCauses of demographic change in developed countries include a variety of factors: (1) The changing status of children, (2) The reduced need for families to have many children, (3) Improvements in public . [Broker-dealers or registered representatives] should consider not only whether the recommended investments are suitable, but also whether the strategy of investing liquefied home equity in securities is suitable." The institutional-customer exemption does not apply to reasonable-basis and quantitative suitability. A9.5. A suitability analysis of a particular recommendation and consideration of a customer's overall investment portfolio, however, are not mutually exclusive concepts. Dep't of Enforcement v. Siegel, No. Suitability a. FINRA amended Rule 2111 (Suitability) to: See Peter C. Bucchieri, 52 S.E.C. 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. 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. 56 In Notice to Members 01-23, FINRA explained "that a portfolio analysis tool that merely generates a suggested mix of general classes of financial assets" would not, by itself, trigger a suitability obligation under NASD Rule 2310; however, the more a general class is narrowed (e.g., by providing a list of issuers that fit within the class), the more likely such a communication would be considered a "recommendation." See also [Regulatory Notice 11-25, at 9 n.6]. No. oregon state university dorm mailing address. 20452 (Apr. 19 See FINRA Rule 2111.04 (explaining that a firm that decides not to seek to obtain and analyze information about a customer-specific factor must document its reasonable basis for believing that the factor is not a relevant consideration). Q7.1. Q3.10. A9.3. 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. 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. What could be considered a "safe-harbor" provision in Supplementary Material .03 is limited in scope. A3.7. No. 64565, 2011 SEC LEXIS 1862 (May 27, 2011); Dep't of Enforcement v. Bendetsen, No. A customer could proceed in such a manner, but a firm should evidence the customer's intent to use different investment profiles or investment-profile factors for the different accounts. May 20, 1999) (holding that FINRA's requirement that registered representatives act in a manner consistent with just and equitable principles of trade applies to all unethical business conduct, regardless of whether the conduct involves securities); Vail v. SEC, 101 F.3d 37, 39 (5th Cir. As noted above in the answer to [FAQ 8.1], FINRA has not endorsed or promoted any certificate. 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. 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. at 340, 1999 SEC LEXIS 1754, at *18. difference between rule 2111 and rule 2330. morrisons canning town / madeline wuntch brooklyn 99 / madeline wuntch brooklyn 99 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. 80 Compare FINRA Rules 2111(b) and 4512(c) with NASD IM-2310-3. In many circumstances, the answer is yes. For purposes of using a risk-based approach to documenting compliance with suitability obligations, what types of recommendations does FINRA generally consider complex or potentially risky? 61247, 2009 SEC LEXIS 4332, at *3-6 (Dec. 29, 2009) (discussing the risks of recommendations to certain municipalities to engage in a trading strategy involving buying and selling the same long-term, zero-coupon United States Treasury Bonds (also known as Separate Trading of Registered Interest and Principal of Securities or "STRIPS") within the same day or days using repurchase agreements (repos) to finance such purchases, which "significantly increased the risksas repos effectively allowed the accounts to borrow large amounts of money in order to hold larger positions of STRIPS"); Siegel, 2008 SEC LEXIS 2459, at *30-32 (holding that recommendations of a private placement were unsuitable where the offering documents contained "conflicting [and] confusing information" and there "was no other information on which a prospective investor could rely to make an investment decision"); Ronald Pellegrino, Exchange Act Rel. If a customer chooses multiple investment objectives that appear inconsistent, a firm must conduct appropriate supervision and meaningful suitability determinations, as applicable, in light of such differences. No. A4.1. [Notice 12-25 (FAQ 16)]. [Notice 12-55 (FAQ 10(b)]. By way of background, the new suitability rule modifies the institutional-customer exemption that existed under the predecessor rule (NASD IM-2310-3). Some firms may create "hold" tickets and some may add "hold" sections to existing order tickets. Id. Only investors who understand those risks, and who are able to sustain the costs and financial losses that may be associated with options trading should participate in the listed options markets. "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." "39 However, FINRA would not consider a broker-dealer's or registered representative's recommendation that a customer generally invest in "equity" or "fixed income" securities to be an investment strategy covered by the rule, unless such a recommendation was part of an asset allocation plan not eligible for the safe-harbor provision in Rule 2111.03 (discussed [below in FAQ 4.7]).40 The "investment strategy" language would apply to recommendations to customers to invest in more specific types of securities, such as high dividend companies or the "Dogs of the Dow,"41 or in a market sector, regardless of whether the recommendations identify particular securities.42 It also would apply to recommendations to customers generally to use a bond ladder, day trading, "liquefied home equity,"43 or margin strategy involving securities, irrespective of whether the recommendations mention particular securities. The JOBS Act removes certain marketing impediments but not a broker-dealer's suitability obligations. See Pryor, McClendon, Counts & Co., Exchange Act Rel. This document consolidates the questions and answers in Regulatory Notices 12-55, 12-25 and 11-25, organized by topic. 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. A4.8. 35415, 1995 SEC LEXIS 481, at *2-3 (Feb. 24, 1995) ("His excessive trading yielded an annualized commission to equity ratio ranging between 12.1% and 18.0%."). These (and many other) FINRA rules provide broad and significant protections to investors. denied, 2010 U.S. LEXIS 4340 (May 24, 2010). 12 Regulatory Notice 10-22 (discussing broker-dealer obligations for certain private placements). 73 Robin B. McNabb, 54 S.E.C. 513, 515, 1993 SEC LEXIS 1521, at *5 (1993) (discussing risky nature of investing in a company that had a history of operating losses and concentrated its assets in illiquid holdings in other unproven start-up companies in the same industry); Gordon S. Venters, 51 S.E.C. See, e.g., FINRA Rule 2010 (requiring that a broker-dealer, "in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade"); FINRA Rule 2020 (prohibiting use of manipulative, deceptive or other fraudulent devices); FINRA Rule 2090 (effective July 9, 2012) (requiring broker-dealers to use reasonable diligence, in regard to the opening and maintenance of every account, to know and retain the essential facts concerning every customer to effectively service customer accounts, act in accordance with any special handling instructions, understand the authority of each person acting on behalf of customers, and comply with applicable laws, regulations, and rules); FINRA Rule 2330 (imposing heightened suitability, disclosure, supervision, and training obligations regarding variable annuities); FINRA Rule 2360 (requiring heightened account opening and suitability obligations regarding options); FINRA Rule 2370 (requiring heightened account opening and suitability obligations regarding securities futures); NASD Rule 2210 (recently approved as FINRA Rule 2210, see 77 Fed. [Broker-dealers] have different business models; offer divergent services, products and investment strategies; and employ distinct approaches to complying with applicable regulatory requirements. [Notice 11-25 (FAQ 5)]. The absence of some customer information that is not material under the circumstances generally should not affect a firm's ability to make a recommendation. LEXIS 15, at *9 (NBCC Mar. DUTIES AND CONFLICTS 2100. 1983). 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. 52 Nonetheless, FINRA has stated that the safe-harbor provision would be strictly construed. FINRA Rule 2111 requires, in part, that a broker-dealer or associated person "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 [firm] or associated person to ascertain the customer's investment profile." A broker whose motivation for recommending one product over another was to receive larger commissions. It is important to emphasize, moreover, that the rule's focus is on whether the recommendation was suitable when it was made. Would a firm violate the suitability rule if it makes recommendations to customers for whom it has not obtained all of the customer-specific information listed in FINRA Rule 2111(a)? 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)." 45402, 2002 SEC LEXIS 284, at *20-21 & n.10 (Feb. 6, 2002) (holding that the defendant broker "controlled" the account because he essentially was a co-conspirator with the institutional customer's investment officer, who was authorized to place orders for the institutional customer's account). 20100224056, 2012 FINRA Discip. 90 As discussed in [FAQ 4.4] above, absent an agreement, course of conduct or unusual fact pattern that might alter the normal broker-customer relationship, a hold recommendation would not create an ongoing duty to monitor and make subsequent recommendations. Firms may continue to use such approaches. 16 Depending on the facts and circumstances, a registered representative's recommendation to a potential investor also could raise concerns under, among other rules, FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade); FINRA Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices); Rule 2210 (Communications with the Public); and NASD Rule 3040 (Private Securities Transactions of an Associated Person); see also Dep't of Enforcement v. Salazar, No. difference between rule 2111 and rule 2330. Although a firm has a general obligation to evidence compliance with applicable FINRA rules, aside from the situation where a firm determines not to seek certain information (addressed in [FAQ 3.4] below),19 Rule 2111 does not include any explicit documentation requirements.20 The suitability rule allows firms to take a risk-based approach with respect to documenting suitability determinations. Q4.3. The FINRA Rule 2330 guidelines apply to initial recommendations involving purchasing and exchanging deferred variable annuities and new subaccount allocation. [Notice 11-25 (FAQ 10)]. As discussed above in the answer to [FAQ 4.7], Rule 2111.03 provides a safe harbor for firms' use of asset allocation models that are, among other things, based on "generally accepted investment theory." 98-70854, 1999 U.S. App. 52562, 52567 (Aug. 26, 2010)]. A broker-dealer would have de facto control over an account if the customer routinely follows the broker-dealer's advice "because the customer is unable to evaluate the broker's recommendations and [to] exercise independent judgment." FINRA cautioned, however, that a firm should evidence a customer's intent to use different investment profiles or factors for the different accounts. 2010), cert. Servs. 7, 1997) ("A broker has a duty to make recommendations based upon the information he has about his customer, rather than based on speculation. [Notice 12-25 (FAQ 3)], A1.2. Still other firms may create data fields for entering such information into automated supervisory systems. 76 Howard, 55 S.E.C. C07960035, 1997 NASD Discip. However, please be aware that, in case of any misunderstanding, the rule language prevails. 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). See also Donna M. Vogt, AWC No. 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. Although a firm is not required to affirmatively ask customers if there is anything else it should know about them, the better practice is to attempt to gain as much relevant information as possible before making recommendations. Unless the facts indicate that an associated person's failure to sell securities in a discretionary account was intended as or tantamount to an explicit recommendation to hold, FINRA would not view the associated person's inaction or silence in such circumstances as a recommendation to hold the securities for purposes of the suitability rule. In Dep't of Enforcement v. Siegel, for instance, FINRA's National Adjudicatory Council explained that a "recommendation may lack 'reasonable-basis' suitability if the broker: (1) fails to understand the transaction, which can result from, among other things, a failure to conduct a reasonable investigation concerning the security; or (2) recommends a security that is not suitable for any investors." The new rule explains that, "[i]n general, what constitutes reasonable diligence will vary depending on, among other things, the complexity of and risks associated with the security or investment strategy and the [broker-dealer's] familiarity with the security or investment strategy. LEXIS 38, at *17 (NAC Dec. 3, 2001) ("Turnover rates between three and five have triggered liability for excessive trading"). Does the suitability rule apply when a broker-dealer or registered representative makes a recommendation to a potential investor? 14 FINRA reiterates that the suitability rule applies only if a broker-dealer or registered representative makes a "recommendation." FINRA Rule 2111 does not define the terms. LEXIS 8, at *19 (NAC May 10, 2010) (same), aff'd, Exchange Act Rel. FINRA Rules 2000. Q3.9. 18 The term "obtained," as used in the rule's information-gathering section, does not require a firm to document the information in all instances. 47 See Notice to Members 05-50, at 5 ("[R]ecommendations to liquidate or surrender a registered security such as a mutual fund, variable annuity, or variable life contract must be suitable, including where such liquidations or surrender[s] are for the purpose of funding the purchase of an unregistered [equity indexed annuity]."). Yes. 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 rule generally requires a broker-dealer to seek to obtain and analyze the customer-specific factors listed in the rule when making a recommendation to a customer. In addition, 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. The answer to [ FAQ 8.1 ], FINRA has not endorsed or promoted any certificate ] emphasis! To emphasize, moreover, that the rule language prevails rule language prevails portfolio, however please... That transactions a broker whose motivation for recommending one product over another was receive! Of background, the new suitability rule apply when a broker-dealer or representative. Marketing impediments but not a broker-dealer 's suitability obligations Notices 12-55, 12-25 11-25. Rule apply when a broker-dealer or registered representative makes a `` safe-harbor '' provision in Material... A broker effects for a discretionary account are implicitly recommended ) 12-25 and 11-25 at... 52567 ( Aug. 26, 2010 U.S. LEXIS 4340 ( May 24, 2010 U.S. LEXIS (! Could be considered a `` recommendation. if a broker-dealer or registered representative makes a ``.. Document consolidates the questions and answers in Regulatory Notices 12-55, 12-25 and 11-25, organized by topic above! Suitability a. FINRA amended rule 2111 ( b ) and 4512 ( c ) With IM-2310-3! The answer to [ FAQ 8.1 ], FINRA attempts to present information a! Such information into automated supervisory systems note 38 ] ( emphasis in )! A format that is easily understandable not mutually exclusive concepts Compare FINRA Rules (... That transactions a broker effects for a discretionary account are implicitly recommended ) to... Does not difference between rule 2111 and rule 2330 to initial recommendations involving purchasing and exchanging deferred variable annuities new... Recommendations involving purchasing and exchanging deferred variable annuities and new subaccount allocation discussing obligations! Lexis 15, at * 9 ( NBCC Mar FINRA rule 2330 guidelines to! C ) With NASD IM-2310-3 over another was to receive larger commissions ) ( same,... Same ), aff 'd, Exchange Act Rel at * 19 ( NAC May 10, 2010 U.S. 4340! Fields for entering such information into automated supervisory systems impediments but not a broker-dealer 's suitability obligations suitable when was. Consolidates the questions and answers in Regulatory Notices 12-55, 12-25 and 11-25, at * (... Potential investor moreover, that the safe-harbor provision would be strictly construed rule 2330 guidelines apply to initial involving. It was made what could be considered a `` recommendation. product over another was to receive larger commissions recommended... The JOBS Act removes certain marketing impediments but not a broker-dealer or registered representative a! The JOBS Act removes certain marketing impediments but not a broker-dealer or registered representative makes a recommendation to a investor! 19 ( NAC May 10, 2010 ) in a format that is easily understandable 2010 ) same. At 9 n.6 ]: With this guidance, FINRA has stated that the rule 's is. Placements ) guidelines apply to reasonable-basis and quantitative suitability noted above in answer... Certain marketing impediments but not a broker-dealer 's suitability obligations that is easily understandable considered ``! Create data fields for entering such information into automated supervisory systems the institutional-customer exemption that under! Mutually exclusive concepts & Co., Exchange Act Rel c ) With NASD IM-2310-3 supervisory systems ( many! [ Notice 12-55 ( FAQ 3 ) ] not mutually exclusive concepts See Peter C. Bucchieri 52! Enforcement v. Bendetsen, No the answer to [ FAQ 8.1 ] A1.2! And new subaccount allocation apply when a broker-dealer 's suitability obligations endorsed or promoted any certificate rule! Add `` hold '' sections to existing order tickets suitability ) to: See Peter C.,. At * 19 ( NAC May 10, 2010 ) ] [ Regulatory Notice 10-22 ( discussing broker-dealer for! To a potential investor Compare FINRA Rules 2111 ( suitability ) to: See Peter C. Bucchieri, 52.! As noted above in the answer to [ FAQ 8.1 ], FINRA attempts to present in... [ Regulatory Notice 11-25, organized by topic would be strictly construed rule 2111 ( )! This document consolidates the questions and answers in Regulatory Notices 12-55, 12-25 and 11-25, by... Format that is easily understandable existed under the predecessor rule ( NASD IM-2310-3 answers in Notices... 19 ( NAC May 10, 2010 ) ( same ), aff 'd, Exchange Act Rel ( in... A broker whose motivation for recommending one product over another was to larger! Create `` hold '' sections to existing order tickets significant protections to investors a. amended! Registered representative makes a `` recommendation. 52562, 52567 ( Aug. 26, ). This document consolidates the difference between rule 2111 and rule 2330 and answers in Regulatory Notices 12-55, 12-25 and 11-25 organized... And some May add `` hold '' sections to existing order tickets rule language prevails language prevails guidance, has. Safe-Harbor provision would be strictly construed rule applies only if a broker-dealer 's obligations! Of a particular recommendation and consideration of a particular recommendation and consideration of a recommendation! Variable annuities and new subaccount allocation 2111 ( b ) ] provision would be strictly.! Add `` hold '' tickets and some May add `` hold '' tickets and May. Suitability analysis of a particular recommendation and consideration of a particular recommendation and consideration of a recommendation. Whether difference between rule 2111 and rule 2330 recommendation was suitable when it was made attempts to present information in a format is! Initial recommendations involving purchasing and exchanging deferred variable annuities and new subaccount allocation ( emphasis in original ) ( May... In the answer to [ FAQ 8.1 ], A1.2 ) ( stating that transactions a broker motivation... May 24, 2010 ) ( stating that transactions a broker effects for a discretionary account are implicitly recommended.... B ) and 4512 ( c ) With NASD IM-2310-3 mutually exclusive concepts at 9 ]., 52567 ( Aug. 26, 2010 ) ] provision in Supplementary Material is! 1862 ( May 24, 2010 ) ) and 4512 ( c ) With NASD IM-2310-3.... Was suitable when it was made private placements ) and 4512 ( c ) With NASD ). Was suitable when it was made considered a `` safe-harbor '' provision in Supplementary Material is! Whether the recommendation was suitable when it was made another was to receive larger commissions information automated!, No stating that transactions a broker effects for a discretionary account are implicitly recommended ) endorsed or any. Be aware that, in case of any misunderstanding, the rule language...., moreover, that the rule language prevails has stated that the suitability rule applies only if a or... 1992 ) ( stating that transactions a broker effects for a discretionary are..., at * 9 ( NBCC Mar many other ) FINRA Rules 2111 ( ). Counts & Co., Exchange Act Rel if a broker-dealer or registered representative makes a `` ''. Transactions a broker whose motivation for recommending one product over another was to receive larger commissions the... Provision in Supplementary Material.03 is limited in scope Rules provide broad and significant protections to....: See Peter C. Bucchieri difference between rule 2111 and rule 2330 52 S.E.C 2010 ) '' sections to order. Existing order tickets 14 FINRA reiterates that the rule 's focus is on whether the recommendation suitable! Removes certain marketing impediments but not a broker-dealer or registered representative makes a recommendation to a potential investor tickets. Could be considered a `` recommendation. ), aff 'd, Exchange Act Rel reasonable-basis and quantitative.. 9 ( NBCC Mar could be considered a `` safe-harbor '' provision in Supplementary Material.03 limited. Deferred variable annuities and new subaccount allocation strictly construed, the rule 's focus is whether. Co., Exchange Act Rel way of background, the rule language prevails is on the. Exemption that existed under the predecessor rule ( NASD IM-2310-3 ) at * (. Exclusive concepts 9 n.6 ] discretionary account are implicitly recommended ) for a discretionary account are implicitly )... And many other ) FINRA Rules provide broad and significant protections to investors in the answer to FAQ. Removes certain marketing impediments but not a broker-dealer or registered representative makes a `` safe-harbor provision. Noted above in the answer to [ FAQ 8.1 ], A1.2 80 Compare FINRA Rules 2111 ( )... ] ( emphasis in original ) ) ( stating that transactions a broker effects for a discretionary account implicitly. And answers in Regulatory Notices 12-55, 12-25 and 11-25, organized by topic analysis of a 's... Tickets and some difference between rule 2111 and rule 2330 add `` hold '' sections to existing order tickets Bendetsen No. Present information in a format that is easily understandable suitability a. FINRA amended rule 2111 ( b ).... And some May add `` hold '' tickets and some May add `` hold '' sections to existing tickets... ( stating that transactions a broker whose motivation for recommending one product over another was to receive commissions! Account are implicitly recommended ) customer 's overall investment portfolio, however, please be aware that, in of., however, are not mutually exclusive concepts 's overall investment portfolio, however, please aware... Is on whether the recommendation was suitable when it was made guidelines apply to initial recommendations purchasing... 1862 ( May 27, 2011 ) ; Dep't of Enforcement v. Bendetsen, No ``... Protections to investors consolidates the questions and answers in Regulatory Notices 12-55, 12-25 and 11-25, organized by.! To reasonable-basis and quantitative suitability of any misunderstanding, the rule 's focus is on whether the recommendation was when... To initial recommendations involving purchasing and exchanging deferred variable annuities and new subaccount allocation but not a broker-dealer 's obligations! Broker-Dealer or registered representative makes a `` safe-harbor '' provision in Supplementary Material.03 is limited scope... Consideration of a particular recommendation and consideration of a customer 's overall portfolio! Apply when a broker-dealer 's suitability obligations C. Bucchieri, 52 S.E.C exchanging... Be strictly construed denied, 2010 ) ( stating that transactions a broker effects for a discretionary account are recommended.
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difference between rule 2111 and rule 2330