Financial advisors are to be relieved of some of their burden in interpreting the FINRA Rule 2111 known as the “Suitability Rule” passed by the Securities and Exchange Commission in November of 2010 and effective in June of this year.
The Rule outlines the requirements that a financial advisor “have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer.” Vague and confusing, right? (The rule has been the most common ground for disciplinary action so far this year according to an analysis by the law firm Sutherland Asbill & Brennan.*)
The Financial Industry Regulatory Authority has now updated its guidance to clarify what the agency meant by “customer” and “investment strategy” in FINRA Rule 2111. The agency has established a website to aggregate all of the various questions and answers regarding Rule 2111. Take a look.