SIE: Section 7

What four obligations must firms address to comply with Reg BI?

1. disclosure obligation 2. care obligation 3. conflict of interest obligation 4. compliance obligation

What are the three main obligations for the analysis of a suitable recommendation?

1. reasonable basis 2. customer-specific 3. quantitative suitability

What are the two criteria for institutional investors to be exempt from customer-specific suitability requirements?

1. rep must believe II-client is capable of making investment decisions independently 2. must affirmatively indicate independent judgement

What three areas does Reg BI cover?

1. specific securities 2. specific account types 3. rollover or transfers

What rule requires firms to know essential facts concerning every customer in order to effectively service the customer's account and make appropriate recommendations?

FINRA Rule 2090

What rule requires investments to be suitable for clients based on objective, time horizon, risk tolerance, tax bracket, and more?

FINRA Rule 2111

What rule requires firms to disclose to customers all material info known about the security that is reasonably accessible to the market?

MSRB Rule G-47

What rule goes beyond FINRA Rule 2111 and requires broker-dealers only make recommendations to retail clients that are in their customer's best interest?

Regulation BI

How do you calculate the current yield on a stock?

annual dividend / current market price

What is the risk called that an investor could lose his entire investment?

capital risk

What is quantitative suitability for FINRA Rule 2111?

consider account's turnover

What is the reasonable basis for FINRA Rule 2111?

means potential risk and rewards of possible recommendation is suitable for at least some investors

What is customer-specific suitability for FINRA Rule 2111?

means rep must analyze a broad array of customer-specific factors to support determination of recommendation