FINRA gives member firms a thumbs up on suitability rule compliance

Abstract

Purpose

The purpose of this paper is to interpret Financial Industry Regulatory Authority (FINRA) Regulatory Notice 13-31, which provides practical advice to member firms about how FINRA will be examining for compliance with the rule, some findings about failures to comply and a set of best practices for compliance.

Design/methodology/approach

The paper explains the three suitability obligations set forth in Rule 2111, the mechanics of FINRA's suitability examinations, overall findings from FINRA's recent suitability examinations, and some measures and practices FINRA has highlighted that could bolster a firm's suitability-focused supervisory and compliance procedures.

Findings

The Notice provides a wealth of information on the types of approaches, systems, procedures and practices that member firms have been using and that FINRA has determined to be most effective in ensuring compliance with the suitability rule.

Practical implications

Although other ways to comply with the rule certainly exist, member firms should review the Notice and consider incorporating the practices discussed or practices likely to achieve similar outcomes.

Originality/value

The paper provides practical guidance from experienced financial services lawyers.

Citation

Nathan, D. and Ignat, A.-M. (2013), "FINRA gives member firms a thumbs up on suitability rule compliance", Journal of Investment Compliance, Vol. 14 No. 4, pp. 34-37. https://doi.org/10.1108/JOIC-10-2013-0033