FINRA appears to have "backtracked" on its earlier broader Suitability Rule Interpretation

In new guidance, FINRA backtracked from an earlier broader interpretation of the rule, which stated that people who were not customers and investment strategies that did not involve securities were covered under the suitability rule.


Regulatory Notice 12-55 (suggest you read it) now states the rule applies only to customers who open an account or buy a product for which the brokerage firm receives compensation.


In addition, the new notice says the suitability rule does not apply to recommendations of non-security products made as part of an individual broker's outside business activity.

The new suitability rule would generally not create a continuing duty to monitor an investment or strategy. 


So, now when you go to a holiday cocktail party you should be able to have idle conversation with people who aren't customers and not be worried about being charged under the suitability rule. Happy Holidays!

Click here to read FINRA Notice

Michael Fugler, NIBA Advisory Committee Chairman

Emily Foshee, NIBA Executive Director



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December 4-6

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