Unsuitability of Brokerages’ Investment Advice


FINRA Arbitration Attorneys

Brokers have a duty to provide advice and recommend investments that are in their customers’ best interests and are consistent with the goals and risk tolerances the customer has expressed. “Unsuitability” is a term used to describe recommendations and trades that are inappropriate for the customer and inconsistent with his or her goals. When recommending an investment, brokers are required to take the time to fully understand an investor’s particular financial situation, investment goals, and ability to tolerate risk. A broker should analyze each investment and trading strategy and recommend only those that are suitable and consistent with the customer’s individual investment needs and objectives. If an investor suffers financial losses as a result of an unsuitable recommendation, the broker’s firm may be liable for such losses.

FINRA Rule 2111: Suitability

Financial Industry Regulatory Authority (FINRA) Rule 2111 addresses the unsuitability of brokerages’ investment advice. Rule 2111 requires brokers and brokerages to use “reasonable diligence” to investigate a customer’s investment profile when recommending a securities transaction or investment strategy.  Under the FINRA Rule, a customer’s investment profile consists of a wide range of individual characteristics, including the customer’s:

  • Age
  • Financial situation and needs
  • Tax status
  • Investment objectives
  • Investment experience
  • Risk tolerance.

The FINRA suitability rule further imposes on brokers and brokerages the responsibility to deal fairly with the public:  FINRA Rule 2111 is “fundamental to fair dealing and is intended to promote ethical sales practices and high standards of professional conduct.”

An Experienced FINRA Attorney Can Help

Far too often investors discover that their investments are unsuitable for them. For example, suppose a broker recommends that an elderly, inexperienced customer with a low risk tolerance invest in a risky hedge fund or complicated structured product.  If the customer does not understand the risks associated with the investment or does not have the financial ability to absorb losses, the customer may bring an unsuitability claim against the brokerage firm to recover losses that resulted from the investment.

The experienced FINRA arbitration attorneys at Zamansky LLC have represented hundreds of investors across the country from all walks of life. We know that all investors are different and their risk tolerances are specific to them. Each securities arbitration lawyer at our firm is well versed in suitability claims.  When investigating a suitability claim, our attorneys carefully examine a client’s investment profile, taking into consideration unique financial and investment characteristics. We will aggressively prepare and pursue claims against the brokerage firm to recoup any financial losses a client suffered as a result of the unsuitable recommendation.

Contact a FINRA Attorney at Zamansky LLC Today

To determine whether you may be able to recover a loss due to a broker or brokerage’s unsuitable recommendation, contact our securities fraud law firm. Contact us today at (212) 742-1414 or complete our contact form. Zamansky LLC responds to all inquiries within 24 hours and offers free, no-obligation initial consultations.