54(6) When a client is a legal person or a group of two or more individuals or if one or more individuals are represented by another individual, the investment firm sets out a policy regarding who should be subject to the aptitude test and how that assessment is carried out in practice, including information about knowledge and experience regarding financial status and investment objectives. The investment firm records this policy. In addition to the change in definition, the new institutional derogation focuses on two factors: (1) whether a broker has „a reasonable basis to believe that the institutional client is able to independently assess investment risks, both in general and with respect to certain investment transactions and strategies that relate to a guarantee or securities” (a factor used in the previous rule) and (2) if the institutional client independently indicates that he or she is exercising an independent judgment” requirement). the client`s adequacy obligation if all of these conditions are met.82 FINRA Rule 2111 requires in part that a broker or associate „has a reasonable basis to believe that a recommended transaction or investment strategy with securities or securities is appropriate for the client, based on the information obtained by the due diligence of the [company] or the related person to determine the client`s investment profile.” In general, a client`s investment profile would include the client`s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment horizon, liquidity needs and risk tolerance. The rule also explicitly applies to recommended investment strategies involving securities, including recommendations for „maintaining” securities. In addition, the three main adequacy obligations are generally mentioned: suitability, customer suitability and quantity. Finally, the rule provides for a modified exemption for institutional clients. An investment must meet the adequacy requirements set out in RULE 2111 of the FINRA rule before being recommended by a company to an investor. In most parts of the world, financial professionals have a duty to take steps to ensure that the investment is tailored to a client. In the United States, for example, the Financial Industry Regulatory Authority (FINRA) monitors and enforces these rules. Adequacy standards are not the same as fiduciary requirements.
F6.1. Does the requirement for quantitative adequacy under the new rule differ from the excessive bargaining line of cases under the previous rule? [Note 12-25 (FAQ 23)] A7.1. In many cases, in interpreting FINRA`s skill rule, it is expressly stated that „a broker`s recommendations must be consistent with the well-being of his clients.” 69 The fact that a broker makes only recommendations that are consistent with the client`s well-being prohibits a broker from putting his interests ahead of the client`s interests.70 Examples of cases in which FINRA and the SEC have found brokers who violate the skill rule by placing their interests above the interests of clients include the following examples :: In a nutshell, the CFS has given financial intermediaries until June 9, 2017 to review and revise their customer agreements to include: A3.6.