FINRA Podcast on Suitability: Effective Practices (with Lofchie Comment)

FINRA has released a podcast featuring a discussion with Executive Vice President Dan Sibears and Senior Vice President Mike Rufino about examination approaches, common findings and effective practices for complying with FINRA Rule 2111 ("Suitability").The suitability rule, which became effective on July 9, 2012, "requires a firm or associated person to have a reasonable basis to believe that a recommended transaction or investment strategy involving a security is suitable for a customer" based on information obtained through "reasonable diligence" to acquire a customer's investment profile.

The podcast summarizes FINRA Regulatory Notice 13-31, which describes the findings of FINRA's examination of firms' compliance with the suitability rule and effective practices for compliance.

Lofchie Comment: Substantively, all of the information in the podcast in contained in Regulatory Notice 13-31, which firms should review carefully. That said, it is also useful to listen to the podcast for the purpose of hearing certain of FINRA's points of emphasis, which included developments as to the following types of supervisory procedure relating to suitability: monitoring of hold recommendations; increased due diligence as to new products and processes for educating sales representatives as to those products; further efforts to gather customer profile information; and processes to monitor "quantitative" suitability.

See: FINRA Podcast on Suitability.Related news: FINRA Regulatory Notice 13-31: Examination Approaches, Common Findings and Effective Practices for Complying with Suitability Rule (with Lofchie Comment) (September 25, 2013).