Posts tagged with: "2111"
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26 Jun 2012, 9:39 am by D. Daxton White
Financial Industry Regulatory Authority Inc.’s Rule 2111 covers general suitability for recommended transactions and investment strategies involving securities. The regulation essentially requires that brokers perform reasonable due diligence to understand the nature of the recommended strategy or securities product and whether it’s suitable. Brokers also must determine suitability on consumer-specific and quantitative levels. Finra has noted that Rule 2111 also will now apply to “hold”… [read post]
17 Dec 2012, 7:56 am by Editorial Board
On December 10, FINRA issued Regulatory Notice 12-55, which provides regulatory guidance in the form of a FAQ regarding customer suitability issues under FINRA Rule 2111.  The amendments to the FAQ address the scope of the terms “customer” and “investment strategy.”  FINRA Notice. [read post]
12 Aug 2011, 12:25 pm by admin
The SEC has approved FINRA’s proposal to adopt additional regulations to the FINRA rulebook.  The approved rules, effective on October 7, 2011, are the FINRA Rule 2090 (Know Your Customer) and FINRA Rule 2111 (Suitability).  These new rules were largely drawn from the NASD and NYSE rules that the new FINRA rules will replace. New FINRA Rule 2090 (Know Your Customer) Very similar to the former NYSE Rule 405 (1), this new rule will require FINRA member firms to “use reasonable diligence, in… [read post]
17 Oct 2013, 8:55 am by admin
A recent FINRA Regulatory Notice (Notice 13-31), issued by the securities regulator in late September, highlights common examination approaches, as well as common findings and effective practices for complying with FINRA’s “new” suitability rule (FINRA Rule 2111).  Among other things, the rule, which went into effect in July 2012 (and previously has been discussed on this blog), codifies a representative’s duty to have a “reasonable basis” for believing that… [read post]
27 Nov 2012, 1:03 pm by D. Daxton White
Churning is defined as an unethical practice employed by some financial advisors to increase their commissions by excessively trading in a client’s account.  This practice violates various FINRA Rules and is often referred to as “churn and burn”, “excessive trading”, “twisting” and “overtrading.” FINRA Rule 2111 codifies a brokerage firms and associated persons’ obligations with respect to churning/excessive trading.  Specifically, FINRA has enacted a… [read post]
21 Dec 2012, 1:02 pm by admin
Recently released FINRA Regulatory Notice 12-55, intended to provide yet more guidance regarding FINRA Rule 2111 – the “new” suitability rule that went into effect in July of this year – appears to strike a balance in favor of members and their associated persons by reining in some of the language contained in earlier Regulatory Notice 12-25 (which, according to FINRA, the new notice supersedes). As reported on this blog in August, FINRA Rule 2111 (the “new”… [read post]
4 Jan 2012, 7:38 am by D. Daxton White
One of the main claims in any securities fraud case has to do with suitability (i.e. were the investments recommended to the customer appropriate in light of the customer’s age, investment experience, investment objectives, etc.). The following is a brief breakdown of the FINRA Rules applicable to suitability. FINRA Rule 2111 Rule 2111 adopts past SEC and FINRA guidance by applying suitability obligations not only to recommended securities transactions, but also to recommended investment… [read post]
12 Mar 2012, 2:00 am by Keith Paul Bishop
FINRA’s New Rule Beginning on July 9, 2012, broker-dealers will be subject to FINRA’s new suitability rule.  Rule 2111(a) requires FINRA members and their associated person to 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 member or associated person to ascertain the customer’s investment profile.”  According… [read post]
9 Apr 2013, 8:34 am by D. Daxton White
The White Law Group continues to follow the SEC discussions regarding the development of a unified fiduciary standard in accordance with Dodd-Frank Wall Street Reform and the Consumer Protection Act. The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that the SEC conduct a review of SEC operations, structure and relationship with Self-Regulator Organizations, such as FINRA.  The Act, which was signed into law in 2010, also proposed a uniform fiduciary standard be established… [read post]
3 Mar 2013, 2:10 pm by Bill Stalter
If you haven’t noticed, there has been some turnover among the associations’ preneed fund managers. With the threat of additional litigation in Wisconsin, this trend could continue. But not all of the turnover has been as publicized as what we have seen in Illinois and Wisconsin. After 20 years at the helm, Merrill Lynch recently gave notice to the Michigan Funeral Directors Association of its resignation. There are no search protocols for preneed fund managers, and so Michigan borrowed… [read post]
23 Oct 2013, 8:03 am by D. Daxton White
Brokerage firms almost always defend FINRA arbitration cases in the same way – (1) the disclosure defense, (2) blaming  you, and (3) blaming the economy.  Firms never take responsibility for their own actions but will spend tons of time talking about how the investor should take responsibility for their actions. The following is a brief overview of these three anticipated defenses to the wave of litigation being filed against UBS Puerto Rico as a result of the firm’s selling of… [read post]
14 Mar 2012, 7:24 am by D. Daxton White
In the wake of the 2008 financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) was signed into law on July 21, 2010.  Dodd-Frank created broad financial regulatory reform. Section 913 of Dodd-Frank mandated that the Securities and Exchange Commission (“SEC”) conduct a study of the effectiveness of legal and regulatory standards of care for broker-dealers and investment advisers.  That study, released on January 21, 2011, recommends that the SEC… [read post]
3 Apr 2013, 12:47 pm by D. Daxton White
Churning claims arise out of the inherent conflict of interest involved because a financial advisor is compensated by commissions earned in buying and selling securities on behalf of a client.  As long as financial advisors are compensated by commissions, the unscrupulous ones will continue to attempt to enrich themselves by excessively trading accounts.  When this happens, a FINRA arbitration claim against the financial advisor or the financial advisor’s employer is often the best… [read post]