{"id":352698,"date":"2017-05-16T16:34:04","date_gmt":"2017-05-16T21:34:04","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/consumer\/securities-law\/suitability-an-intro-to-finra-rule-2111.html"},"modified":"2024-05-21T10:43:29","modified_gmt":"2024-05-21T15:43:29","slug":"suitability-an-intro-to-finra-rule-2111","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/consumer\/securities-law\/suitability-an-intro-to-finra-rule-2111.html","title":{"rendered":"Suitability: An Intro to FINRA Rule 2111"},"content":{"rendered":"\n
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Suitability: An Intro to FINRA Rule 2111<\/h1>\n
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\n By Oni Harton, J.D.<\/a> | Legally reviewed by Melissa Bender, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

In recent years, the securities industry has received more extensive regulation. Regulations seek to increase investor protections and hold brokers and firms accountable to the public. FINRA, the Financial Industry Regulatory Authority, has played a primary role in creating rules to regulate the securities industry. It also enforces violations of these rules.<\/p>\r\n

One of FINRA’s goals is investor protection. It protects investors from risky or abusive behavior by broker-dealers. To further this goal, FINRA created a customer-specific suitability rule. <\/p>\r\n

Investment objectives must consider the customer’s investment objectives. This rule requires brokers to have a reasonable basis to believe that a specific investment strategy is suitable for a particular customer account. <\/p>\r\n

Read on to learn more about suitability and FINRA Rule 2111.<\/p>\r\n

What Is FINRA?<\/h2>\r\n

FINRA, the Financial Industry Regulatory Authority<\/a>, oversees all brokerage firms and financial advisors. FINRA is the successor to the National Association of Securities Dealers (NASD). The U.S. Securities and Exchange Commission<\/a> (SEC) oversees FINRA, a not-for-profit, self-regulating organization (SRO) authorized by Congress.<\/p>\r\n

The Securities Exchange Act of 1934<\/a> (Exchange Act) created SROs to enforce industry standards and requirements for securities trading and brokerage. FINRA creates and enforces rules governing the broker-dealer industry<\/a>. Several FINRA rules<\/a> ban unauthorized trading. FINRA also sets up procedures to handle disputes between brokers and customers, including arbitration procedures<\/a>.<\/p>\r\n

Members of FINRA include all securities firms<\/a> doing business with the public. FINRA also provides oversight and enforcement to the following:<\/p>\r\n