Weltz Law Home
Securities Fraud Attorneys Representing Clients Nationwide
When you engage the services of a financial broker, it is with the understanding that they will act in your best interests and only recommend investments that are suitable for you. However, the reality is that brokers can often act in their own interests instead of yours, recommending an investment that does not fit with your financial goals to benefit themselves. In fact, there is even a FINRA rule protecting investors from the fraudulent actions of brokers who recommend unsuitable investments to their clients.
When that happens, it can feel like you have no one to turn to. That is why our experienced team of attorneys at Weltz Law specialize in representing investors who have been victims of securities fraud.
Suitability Obligations
This FINRA rule was put in place to ensure ethical sales practices amongst brokers and protect investors. Rule 2111 under FINRA requires brokers to have a “reasonable basis” to believe that a recommended investment product and/or securities strategy is suitable for the client. Suitability is determined based on information the client has provided the broker with through reasonable diligence, and can include the client’s age, financial situation, investment goals, risk index and liquidity needs. Brokers must have a thorough understanding of both the client and the product they are recommending in order to comply with Rule 2111.
Suitability can be further divided into three categories, as explained below.
Reasonable-Basis Suitability
Brokers must make a detailed analysis of each individual client’s investment profile before deciding whether a particular strategy is suitable for them. An obvious factor to consider is age: clients who are nearing retirement age often have different financial goals from first-time investors just entering the job market. The broker has to analyze each aspect of a client’s profile to support their determination that their recommendation is suitable.
Reasonable-Basis Suitability
Brokers must make a detailed analysis of each individual client’s investment profile before deciding whether a particular strategy is suitable for them. An obvious factor to consider is age: clients who are nearing retirement age often have different financial goals from first-time investors just entering the job market. The broker has to analyze each aspect of a client’s profile to support their determination that their recommendation is suitable.
Quantitative Suitability
Brokers must make a detailed analysis of each individual client’s investment profile before deciding whether a particular strategy is suitable for them. An obvious factor to consider is age: clients who are nearing retirement age often have different financial goals from first-time investors just entering the job market. The broker has to analyze each aspect of a client’s profile to support their determination that their recommendation is suitable.
