Conquering Current Compliance Challenges
Aug. 14, 2019 | 2:00 - 2:30 PM EST
 
RECORDED WEBINARS

Conquering Current Compliance Challenges
Recorded: June 11, 2019 
 
Includes: Best Practices, Key Regulatory Issues and Compliance Tips
 
Includes: 23 Best Practices, 5 Peer-tested tools and 15 No Action Letters


 
SUITABILITY OVERVIEW
FINRA rule 2111 addresses broker-dealer requirements when it comes to suitability.  The SRO notes that the rule requires a firm or associated person to “have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile.”
 
Firms and associated persons generally must attempt to obtain and analyze customer-specific information such as a customer’s age, investment experience, time horizon, liquidity needs and risk tolerance when making recommendations to customers.

Exam focus

Examinations for compliance with the suitability rule typically begin with an analysis of a firm’s controls.  Examiners will interview those principals responsible for preparing firm’s P&Ps.  They will also look at products the firm sells, customer profiles and the readiness to control suitability risks.   
 
Recently, examiners have been focusing on the marketing, sale and suitability of:
  • Complex structured products;
  • Private REITs;
  • Frontier funds;
  • Interest rate sensitive securities;
  • Long duration corporates;
  • Emerging market debt;
  • Municipal securities; and
  • Baby bonds.
Firms and registered reps should be attentive to changing circumstances that may affect suitability decisions and risk descriptions.  Training registered reps and providing guidance around suitability are important.

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