All recommendations to customers must be suitable based upon the customer’s investment objectives, their financial profile, and their attitudes towards investing. Representatives usually make verbal recommendations to customers. The representative will review the customer’s investment objective with them and offer facts to support their basis for the recommendation, as well as an explanation as to how the recommendation will help the customer meet their objectives. Any predictions about the performance of an investment should be stated strictly as an opinion or belief, not as a fact. If the firm uses reports that cite past performance of the firm’s previous recommendations, the report must contain:

  • The prices and dates when the recommendations were made
  • General market conditions
  • The recommendations in all similar securities for 12 months
  • A statement disclosing that the firm is a market maker (if applicable)
  • A statement regarding whether the firm or its officers or directors own any of the securities being recommended, or options, or warrants for the same security
  • If the firm managed or co-managed an underwriting of any of the issuers securities in the last three years
  • A statement regarding the availability of supporting documentation for the recommendations

While making a recommendation, a representative may not:

  • Guarantee or promise a profit or promise no loss
  • Make false, misleading, or fraudulent statements
  • Make unfair comparisons to dissimilar products


Professional Conduct In The Securities Industry

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