FINRA modified its suitability and non-cash compensation requirements to align with Regulation Best Interest ("Reg. BI").
Under the final rules, FINRA amended:
- Rule 2111 ("Suitability") to (i) clarify that it will not be applicable to recommendations that are subject to Reg. BI, and (ii) remove the element of the "quantitative suitability" provision that made the rule applicable only to members or associated persons with "actual or de facto control over" customer accounts;
- Capital Acquisition Suitability (CAB) Rule 211 ("Suitability") to clarify that it will not be applicable to recommendations that are subject to Reg. BI; and
- Rules 2310 ("Direct Participation Programs"), 2320 ("Variable Contracts of an Insurance Company"), 2341 ("Investment Company Securities"), and 5110 ("Corporate Financing Rule - Underwriting Terms and Arrangements") to align their restrictions on payment and receipt of non-cash compensation for sales of securities with Reg. BI's prohibitions on sales contests, sales quotas, bonuses, and other non-cash compensation.
The amendments will go into effect on June 30, 2020, which is also the compliance date for Reg. BI.
Originally published June 19, 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
