All advisors and brokerage firms should treat the investors with honesty, integrity and with professional ethics. Their conflict of interest or selfish motive of financial benefit should not play a role in selling an investment product to any investor of any economic background.
The suitability rule of Financial Industry Regulatory Authority (FINRA) states that companies and their related individuals must have reasonable grounds to believe that a transaction or investment strategy involving the securities they recommend is suitable for the client. Suitability obligations are critical to ensuring investor protection and promoting fair dealings with customers and ethical sales practices.
The Investment suitability is often based on the information obtained through the due diligence of the firm or its members to ascertain the client’s investment profile that includes but not limited to:
Rule 2111 of the Financial Industry Regulatory Authority (FINRA) requires the brokers to have a solid understanding of both the product and the client. The lack of such an understanding itself violates the suitability rule.
Rule 2111 lists below the three main suitability obligations for brokerage firms and their associated members.