Broker and investment advisers are required by law, as well as FINRA rules, to only recommend investments that are suitable for a customer based on their investment objective, risk tolerance and a variety of other factors that make up the customer’s investment profile. Brokers and advisers are further required by FINRA to perform both a general and customer-specific suitability analysis and make a proper determination that the proposed investment is suitable for at least some investors and also is suitable for the specific customer prior to recommending it.
Failure of a broker/adviser to recommend suitable investments provides grounds to recover any resulting investment losses.
FINRA Rule 2111: Suitability
FINRA Rule 2111 sets forth the suitability requirement. As noted, the rule compels the brokers and brokerage firms to use reasonable diligence and investigate the investment profile of a customer whenever they are recommending a securities transaction/investment strategy.
Furthermore, the FINRA Rule 2111 specifies the investment profile of a customer must entail a wide range of individual characteristics. These include the tax status, age, risk tolerance, financial needs/situation, investment objectives, as well as the investment experience of the investor.
The rule also compels the brokerages and brokers to deal fairly and honestly when dealing with the public. Generally, the rule focuses on promoting fair dealings, and it is meant to promote ethical sales practices and also professional conduct high standards.
Get the Help of an Experienced Attorney
If you believe you have suffered an investment loss as a result of unsuitable investment recommendations, or simply have a question about any of your investments, give us a call on our toll-free number, 855-980-5771for a free consultation. You can also fill out the contact form, and we will get back to you in less than 24 hours. We have many years of experience in representing aggrieved investors in FINRA arbitrations and in court. We always strive to provide value to our clients. We are here to help. Call our Securities Fraud Lawyers today.