Rule 405

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Rule 405

NYSE codification of "know your customer" rules, which require that a customer's situation is suitable for any investment being made.

Rule 405

A New York Stock Exchange rule requiring investment advisers to only make or recommend investments for their clients' accounts that a "prudent person" would make. This means that investment advisers are not allowed to make investments they believe will lose money for the client. It does not require that the investment adviser always make correct decisions; it merely requires him/her to make decisions that will be generally accepted as sound for someone of average intelligence who seeks to do what is in the client's best interests as the client defines them. It is an example of a suitability rule. See also: Prudent-Person Rule.

Rule 405

The "know your customer" rule of the New York Stock Exchange that requires member firms to obtain significant facts from customers when opening new accounts. These facts are supposed to give the broker and the firm some background on the customers.