Suitability rules

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.

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.
The New York Department of Financial Services' proposal would amend New York's existing suitability rules beyond those covered by the federal U.S.
While Keating was head of the ACLI, he played a prominent role in shaping the product suitability rules that now govern the annuity sales process.
However, the DOL rule will only apply to qualified money while non-qualified money will remain under state suitability rules, creating confusing scenarios in which advisors and carriers will have to wear two sets of compliance hats.
"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.
However, she urged her fellow advisors that to ensure a "stress-free audit," they should "do what you're supposed to do, even if you don't agree with the rules." That was the case with Selah Financial, she said, particularly when it came to FINRA's recently finalized and complex suitability rules.
It's the 5 percent that end up on my desk and force us to take action at the state level and also to address new suitability rules at the NAIC.
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).
(68.) See Dan Jamieson, New Finra Suitability Rules Worry Industry:
Producers are scared about compliance and suitability rules. Carriers are scared about the impacts to their capital.
That section states that the Commission [SEC] shall treat as an exempt security under Section 3(a)(8) of the 1933 act "any insurance or endowment policy or annuity contract or optional annuity contract" that isn't a variable contract and that, if issued on or after June 16, 2013, is issued by an insurer that has adopted suitability rules at least as stringent at the NAIC Suitability in Annuity Transaction Model Reg #275 of 2010 and any successor thereto.
The suitability rules applying to VAs were generally stricter than those applying to fixed annuities.