FINRA Rule 2111 Suitability (United States)
FINRA's suitability rule for broker-dealer recommendations of securities transactions and investment strategies: the reasonable-basis belief resting on the customer's investment profile, the three components (reasonable-basis, customer-specific and quantitative suitability), the broad reading of investment strategy including hold recommendations, the institutional-account carve-out on independent judgment, the ban on disclaimers and the financial-ability test, as narrowed by Regulation Best Interest for retail customers from 30 June 2020.
FINRA Rule 2111 Suitability (United States) is a compliance framework from United States with 3 domains and 11 controls. The largest domains are Supplementary Material .01 to .06: principles, strategies, profile, three components, financial ability – FINRA Rule 2111 Suitability (United States) (7 controls), Rule 2111(a): the suitability obligation and the customer investment profile – FINRA Rule 2111 Suitability (United States) (2 controls), Rule 2111(b) and .07: institutional accounts – FINRA Rule 2111 Suitability (United States) (2 controls). Every control below carries what it requires and what an assessor expects to see.
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Framework Domains (3)
Rule 2111(a): the suitability obligation and the customer investment profile – FINRA Rule 2111 Suitability (United States)
| Code | Title |
|---|---|
| finra-rule-2111-suitability-united-states::2111a-profile | Collect and analyse the customer investment profile: age, other investments, financial situation, tax status, objectives, experience, horizon, liquidity, risk tolerance |
| finra-rule-2111-suitability-united-states::2111a-reasonable-basis | Have a reasonable basis to believe each recommended transaction or strategy is suitable for the customer |
Rule 2111(b) and .07: institutional accounts – FINRA Rule 2111 Suitability (United States)
| Code | Title |
|---|---|
| finra-rule-2111-suitability-united-states::2111-07-independent-judgment | Accept an institutional customer's independent-judgment indication trade-by-trade, by asset class or for the whole account |
| finra-rule-2111-suitability-united-states::2111b-institutional | Treat an institutional account's customer-specific suitability as met only where the customer can evaluate risk independently and says it is exercising independent judgment |
Supplementary Material .01 to .06: principles, strategies, profile, three components, financial ability – FINRA Rule 2111 Suitability (United States)
| Code | Title |
|---|---|
| finra-rule-2111-suitability-united-states::2111-01-fair-dealing | Run sales efforts on the fair-dealing principle that underlies the suitability rule |
| finra-rule-2111-suitability-united-states::2111-02-no-disclaimer | Never disclaim suitability responsibilities in account documents or marketing |
| finra-rule-2111-suitability-united-states::2111-03-strategies | Treat an investment strategy broadly, including an explicit recommendation to hold, while excluding general education, plan descriptions, allocation models and interactive tools that recommend no particular security |
| finra-rule-2111-suitability-united-states::2111-05a-reasonable-basis | Perform reasonable diligence on each product or strategy so that it is suitable for at least some investors and its risks and rewards are understood |
| finra-rule-2111-suitability-united-states::2111-05b-customer-specific | Match each recommendation to the particular customer's investment profile |
| finra-rule-2111-suitability-united-states::2111-05c-quantitative | Watch the account for quantitative suitability: turnover rate, cost-to-equity ratio and in-and-out trading |
| finra-rule-2111-suitability-united-states::2111-06-financial-ability | Recommend a transaction, a continuing purchase programme or a strategy only where the customer can meet the financial commitment |
What is FINRA Rule 2111 Suitability (United States) and who does it apply to?
FINRA Rule 2111 Suitability (United States) is a compliance framework from United States with 3 domains and 11 controls. FINRA's suitability rule for broker-dealer recommendations of securities transactions and investment strategies: the reasonable-basis belief resting on the customer's investment profile, the three components (reasonable-basis, customer-specific and quantitative suitability), the broad reading of investment strategy including hold recommendations, the institutional-account carve-out on independent judgment, the ban on disclaimers and the financial-ability test, as narrowed by Regulation Best Interest for retail customers from 30 June 2020. It is used by organisations to establish and maintain compliance with industry standards and regulatory requirements.
What does FINRA Rule 2111 Suitability (United States) actually require?
FINRA Rule 2111 Suitability (United States) has 11 controls organised across 3 domains. The largest domains are Supplementary Material .01 to .06: principles, strategies, profile, three components, financial ability – FINRA Rule 2111 Suitability (United States) (7 controls), Rule 2111(a): the suitability obligation and the customer investment profile – FINRA Rule 2111 Suitability (United States) (2 controls), Rule 2111(b) and .07: institutional accounts – FINRA Rule 2111 Suitability (United States) (2 controls). Each control defines specific requirements that organisations must implement to achieve compliance.
If I already comply with another framework, how much of FINRA Rule 2111 Suitability (United States) do I already cover?
FINRA Rule 2111 Suitability (United States) does not currently have cross-framework mappings in our system. Check back as we continuously expand our mapping database.
How do I implement FINRA Rule 2111 Suitability (United States)?
Start your FINRA Rule 2111 Suitability (United States) compliance journey by running a self-assessment on our platform to identify your current compliance posture. Our AI advisory can answer specific questions about FINRA Rule 2111 Suitability (United States) requirements, and cross-framework mapping helps you leverage existing controls from other frameworks you may already comply with. Create a free account to access all 11 controls and track your progress.
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