Suitability rules

Policies and guidelines that brokers must use to ensure that investors have the financial means to assume risks that they wish to undertake. These are enforced by the NASD and other self-regulatory organizations.

Suitability Rule

A stated or implied requirement by a regulatory body that a broker or investment adviser must reasonably believe that a certain investment decision will benefit a client before making a recommendation to him/her. That is, the broker or investment adviser must act in good faith, and may not knowingly recommend bad investments. Different regulators and self-regulating organizations incorporate suitable rules in different places in their bylaws. Two commonly referenced suitability rules are Rule 2310 for the Financial Industry Regulatory Authority and Rule 405 for the NYSE. See also: Due diligence, Prudent-person rule, Twisting.

Suitability rules.

Self-regulatory organizations (SROs), such as NASD, securities exchanges, and individual brokerage firms require that stockbrokers ensure that the investments they buy for you are suitable for you.

This means, for example, that the investments are appropriate for your age, financial situation, investment objectives, and tolerance for risk.

Brokerage firms require investors opening accounts to provide enough information about their financial picture to enable the broker to know what investments would be suitable.

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References in periodicals archive

In other words, cost is a more important factor under the best interest standard than it is under the suitability rules. In explaining the best interest process for evaluating costs, the SEC says the adviser will need to justify recommending a higher-cost investment fund over another, lower-cost alternative that is reasonably available.

'Reg BI' and Dual Registrants

The New York Department of Financial Services' proposal would amend New York's existing suitability rules beyond those covered by the federal U.S.

Insurance Groups Ask NY Regulator To Slow Movement on Life, Annuities Rule

"If there are any illegal acts conducted by officers of listed companies that are proven true, this could have an impact on any application for listings of such company in the context of our suitability rules. If there will be continuous disclosure violations by any company that will be established by the exchange after the conduct of its own investigations and affording due process, they will also be subjected to penalties as provided by the PSE rules," Sicat said.

PSE probes listed firms linked to Tiu

Land suitability rules comprising soil, climate and landscape parameters were developed by TIA for 20 different enterprises using a four-class (well-suited, suitable, moderately suited, unsuited) most-limiting factor approach (Klingebiel and Montgomery 1961).

Digital mapping of a soil drainage index for irrigated enterprise suitability in Tasmania, Australia

(68.) See Dan Jamieson, New Finra Suitability Rules Worry Industry:

How "suitable" is the language of suitability in the modern era?