Abstract

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The Suitability Rule, Investor Diversification, And Using Spread To Measure Risk

Richard A. Booth
Villanova University School of Law

Business Lawyer, Vol. 54, Pp. 1599-1627, 1999

Abstract:
This article reviews the state of the law regarding actions against broker-dealers based on the NASD suitability rule and similar theories, summarizes the theory and practice of investor diversification, explains the motivations that may lead a broker to recommend excessively risky securities and investment strategies, and discusses the various methods that may be used to quantify or compare risk, focusing in particular on how the bid-ask spread may be used as a forward-looking surrogate for the direct measurement of risk.

Accepted Paper Series

Date posted: February 02, 2000 ; Last revised: December 28, 2007

Suggested Citation

Booth, Richard A., The Suitability Rule, Investor Diversification, And Using Spread To Measure Risk. Business Lawyer, Vol. 54, Pp. 1599-1627, 1999. Available at SSRN: http://ssrn.com/abstract=200388

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Contact Information

Richard A. Booth (Contact Author)

Villanova University School of Law ( email )

299 N. Spring Mill Road
Villanova, PA 19085
United States
6105197068 (Phone)
610595672 (Fax)