Stop and Stop Limit Orders – FINRA Regulatory Notice 12-50

Stockbroker Law - Monday, March 25, 2013
Stop and Stop Limit Orders – FINRA Regulatory Notice 12-50

The Securities and Exchange Commission has approved amendments relating to stop orders in customer accounts, with an effective date of January 21, 2013.  This Regulatory Notice addresses new FINRA Rule 5350 (Stop Orders), which replaces the stop order provisions of FINRA Rule 6140(h). 


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Supervisory Red Flags Under FINRA Rule 2111

Stockbroker Law - Tuesday, March 12, 2013
Supervisory Red Flags Under FINRA Rule 2111

Rule 2111 of the Financial Industry Regulatory Authority (FINRA) requires firms to have a supervisory system to focus on the detection, investigation and follow-up of “red flags” indicating that a Registered Representative may have recommended an unsuitable investment strategy with both a security and a non-security component.  For example, a Registered Representative’s recommendation that a customer with limited means purchase a large position in a security might raise a red flag regarding the source of funds for such a purchase.  Additionally, the liquidation of a large position in blue chip stocks paying regular dividends is cited in the Notice as a “red flag” as to whether or not that recommendation is part of a broader investment strategy. 


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Supervisory Red Flags Under Rule 2111

Stockbroker Law - Tuesday, March 12, 2013
Supervisory Red Flags Under Rule 2111

The Notice requires firms to have a supervisory system to focus on the detection, investigation and follow-up of “red flags” indicating that a Registered Representative may have recommended an unsuitable investment strategy with both a security and a non-security component.  For example, a Registered Representative’s recommendation that a customer with limited means purchase a large position in a security might raise a red flag regarding the source of funds for such a purchase.  Additionally, the liquidation of a large position in blue chip stocks paying regular dividends is cited in the Notice as a “red flag” as to whether or not that recommendation is part of a broader investment strategy. 


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FINRA Announces Requirement of Heightened Supervision of Complex Products in NASD Notice to Members 12-03

Stockbroker Law - Tuesday, March 05, 2013
FINRA Announces Requirement of Heightened Supervision of Complex Products in NASD Notice to Members 12-03

The Financial Industry Regulatory Authority (FINRA) has recently defined complex products to include many of the investment vehicles whose risks were exposed during the financial crisis of 2008-2009.  Examples of complex products include the following: 


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FINRA Suitability Rule 2111 Also Applies to Investment Strategy and Non-Security Investments

Stockbroker Law - Friday, March 01, 2013
FINRA Suitability Rule 2111 Also Applies to Investment Strategy and Non-Security Investments

A customer has been determined to include “a person who is not a broker or dealer who opens a brokerage account at a broker dealer or purchases a security for which the broker-dealer receives or will receive, directly or indirectly, compensation, even though the security is held at an issuer, the issuers affiliate or the custodial agent (e.g. direct application, business, investment program, securities or private placements), or using another similar arrangement. 


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