Suitability of Recommendations
FINRA rules require registered representatives to take the following into account before recommending investments to individual investors (non-institutional:
The customer's financial status, tax status, investment objectives and such other information used or considered to be reasonable in making recommendations to the customer.
FINRA rules require the representative to only make suitable recommendations and to deal fairly with customers. The following practices are examples of violations of the suitability rules:
- Recommending speculative low-priced securities without attempting to obtain information about the client's financial situation, needs, and other assets
- Borrowing or using customer's fund or securities
- Failing to describe important facts and risks about the security to each client
- Making trades of excessive size in a client's account
- Churning in a client account (making trades too frequently)
- Fraudulent activity - making unauthorized transactions in a customers account or setting up fictitious accounts to disguise prohibited activities
- Recommending trades that are too expensive, too risk or beyond the client's financial ability
Financial AdvisorThe securities industry isn't happy with the hand it may be dealt with the SEC's proposed CARDS rules.
MarketsFind out the history of FINRA, and how it's organized to monitor the markets and protect investors.
Financial AdvisorDiscover the differences between the Suitability and Fiduciary Standards when hiring a financial advisor.
Financial AdvisorLearn the five things an advisor should know before investing another person's money, with a focus on the FINRA "know your customer" rule.
Financial AdvisorFINRA and other regulators are starting to put robo-advisors under a microscope. Here's what they are focusing on.
Financial AdvisorRIAs and brokers are held to different standards when providing investment advice. Here's how they differ.
RetirementSupporters of the new "fiduciary rule" say it could save Americans with IRAs and 401(k)s around $17 billion per year, but some say it will just lead to higher fees.
Financial AdvisorTo become a registered investment advisor requires specific licensing, qualifications and regulations, but the greater freedom may be worth it.
Financial AdvisorThe DoL had proposed rules that would have a major impact on financial advisors. If they are approved here's what it would mean.
Financial AdvisorFINRA has issued a report that outlines its policies on digital technology and retail client portals and what firms need to do to stay compliant.