FINRA Proposes Amendments To Quantitative Suitability Rules

On April 20, 2018, FINRA issued proposed amendments to Rule 2111's "quantitative suitability" provisions. According to FINRA, the proposal is designed to more effectively counter the problem of "churning," or excessive trading in customer accounts.

As discussed below, the proposal arrives shortly after the SEC's proposal of "Regulation BI" and illustrates how these two regulators will need to coordinate in order to ensure that broker-dealers are not subject to inconsistent sets of rules.

The proposal, issued in Regulatory Notice 18-13, may be found here. We have previously discussed the three main obligations imposed by Rule 2111 (reasonable-basis suitability, customer-specific suitability and quantitative suitability) in Frequently Asked Questions which may be accessed here.)