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 rule

A National Association of Securities Dealers guideline that requires a brokerage firm to have reasonable grounds for believing a recommendation fits the investment needs of a client. See also Rule 405.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Mentioned in

References in periodicals archive

The DFS recently issued its own suitability rule for those selling annuities and life insurance products.

Regulatory Update

Monzon said they have added a suitability rule on people running the company before approving the company's application for initial public offering (IPO).

PSE to apply suitability rule on firms aiming to go public

He said the PSE had informed the company in a letter on March 13, 2017 that the case filed by the government against the LBC Group 'raised serious concerns with regard to LBC's compliance with the PSE Suitability Rule.'

SEC turns down LBC shares sale plan

* Updated suitability section based on new suitability rule and its application

"The Solomon Exam Prep Guide: Series 51 MSRB Municipal Fund Securities Limited Principal Qualification Examination, 2nd Edition" Now Available

Applicability of the Suitability Rule to Investment

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

In connection with its continuing process of reconciling regulations as part of the FINRA consolidated rulebook, FINRA had proposed changes to FINRA Rule 2090, the know your customer rule, and Rule 2111, the suitability rule. In late August 2010, the final proposed rules were published for comment and the comment period closed last month.

Structured Thoughts: News for the Financial Services Community - Volume 1, Issue 13

Each suitability rule created by the user belongs to a specific land-use type.

Validation and demonstration of the Prescott spatial growth model in metropolitan Atlanta, Georgia