Suitability Obligations Applicable to Securities and Annuities

Practicing Law Institute Securities Arbitration, 2015

St. John's Legal Studies Research Paper No. 15-0037

19 Pages Posted: 12 Jul 2015 Last revised: 5 Oct 2017

See all articles by Christine Lazaro

Christine Lazaro

St. John's University - School of Law

Benjamin Edwards

University of Nevada, William S. Boyd School of Law

Date Written: May 11, 2015

Abstract

There are various rules governing a broker's investment recommendations to a customer. FINRA, the main entity responsible for regulating brokers, has enacted a suitability rule which sets forth a broker's obligations when making a recommendation to a customer. In 2011, FINRA amended this rule. This article describes the 2011 amendments and explains the current obligations when a broker recommends that a customer purchase, hold or sell a security.

In addition to the FINRA suitability rule, there may be addition rules that specify a broker's conduct when a broker is recommending that a customer purchase an annuity. This article describes the differing obligations that are triggered when a broker recommends a variable annuity and an equity-indexed annuity to a customer. Equity-indexed annuities have very specific obligations because they have sometimes been viewed as both a security and insurance and sometimes solely as an insurance product.

Keywords: Suitability, Annuities, Equity-Indexed Annuities, Brokers, Securities

JEL Classification: K22

Suggested Citation

Lazaro, Christine and Edwards, Benjamin, Suitability Obligations Applicable to Securities and Annuities (May 11, 2015). Practicing Law Institute Securities Arbitration, 2015, St. John's Legal Studies Research Paper No. 15-0037, Available at SSRN: https://ssrn.com/abstract=2392637

Christine Lazaro (Contact Author)

St. John's University - School of Law ( email )

8000 Utopia Parkway
Jamaica, NY 11439
United States

Benjamin Edwards

University of Nevada, William S. Boyd School of Law ( email )

4505 South Maryland Parkway
Box 451003
Las Vegas, NV 89154
United States

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