What is a 2111?

Rule 2111 prohibits a member or associated person from recommending a transaction or investment strategy involving a security or securities or the continuing purchase of a security or securities or use of an investment strategy involving a security or securities unless the member or associated person has a reasonable …

When did FINRA Rule 2111 become effective?

Practice Tip: Rule 2111 raises a number of concerns that FINRA member firms must address by October 7, 2011, the effective date of the new rules.

What are the main suitability obligations?

The rule, moreover, identifies the three main suitability obligations: reasonable-basis, customer-specific, and quantitative suitability.

What do you need to know about FINRA rule 2111?

(b) The customer-specific obligation requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile, as delineated in Rule 2111 (a).

What are the requirements to be a member of FINRA?

Preliminary Note: The requirements of this Rule are in addition to other existing member obligations under FINRA rules and the federal securities laws, including obligations to determine suitability of particular securities transactions with customers and to have a reasonable basis for any recommendation made to a customer.

How does FINRA’s suitability rule apply to securities?

The suitability rule applies only to recommended securities and investment strategies involving securities, but FINRA does not define the term “recommendation” other than to say that it is a facts and circumstances inquiry. What factors determine whether a recommendation has been made for purposes of the suitability rule? [Notice 12-25 (FAQ 2)]

What are the three requirements of rule 2111?

Rule 2111 is composed of three main obligations: reasonable-basis suitability, customer-specific suitability, and quantitative suitability. (a) The reasonable-basis obligation requires a member or associated person to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors.