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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