Practicing Law Institute Securities Arbitration, 2015
18 Pages Posted: 12 Jul 2015
Date Written: May 11, 2015
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: Suggested Citation
Lazaro, Christine and Edwards, Benjamin P., Suitability Obligations Applicable to Securities and Annuities (May 11, 2015). Practicing Law Institute Securities Arbitration, 2015; St. John's Legal Studies Research Paper No. 15-0024. Available at SSRN: https://ssrn.com/abstract=2392637