BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Investments - Private
- Features/Scandals
- Companies
- Technology/Internet
- Rules & Regulations
- Crimes
- Investments
- Bad Advisors
- Boiler Rooms
- Hirings/Transitions
- Terminations/Cost Cutting
- Regulators
- Wall Street News
- General News
- Donald Trump & Co.
- Lawsuits/Arbitrations
- Regulatory Sanctions
- Big Banks
- People
TRENDING TAGS
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
ABOUT FINANCIALISH
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
SUBSCRIBE FOR
NEWSLETTERS & ALERTS
FOLLOW US
Brokers’ Rocky Relationship with Private Securities Transactions [Part 2 of 2]
[Image: Suitability / Woolbright Group]
by Howard Haykin
Only time will tell how good a broker’s recommendations are. Of more immediate concern, perhaps, is ... how and why did a broker recommend a particular security to specific customers or investors?
- What reasonable basis did the broker have for believing the investment was suitable?
- How well did the broker understand the security (its risks, rewards) before recommending it?
- How fully and accurately did the broker communicate the underlying nature of the recommended security to customers and investors, including their merits and attendant risks?
Brokerage customers draw comfort knowing that a broker's recommendations are supported by the diverse expertise and oversight of a brokerage firm – its research analysts, investment bankers, and supervisory personnel.
INVESTOR TYPES AND INVESTMENT RISK. It's a given that all investments carries "RISK" - - the chance that an outcome or investment's actual gains will differ from an expected outcome or return. Risk also includes the possibility of losing some or all of an original investment. So the relevant question for individuals is … which type of investor are you?
- A sophisticated, high net worth customer who can afford to lose upwards of $200,000 by investing in the private stock offering by an energy company? [See the prior Financialish posting, Brokers’ Rocky Relationship with Private Securities Transactions.]
- An unsophisticated customer who can ill afford to lose $75,000, but easily succumbs to a broker’s unsubstantiated sales pitch? [See Financialish posting, Customers Lose on ‘Leap of Faith’ Into Broker’s Private Investment.]
To identify one's ‘investor’ type, refer to the 'Investment Profile' on the brokerage firm's New Account Form. 'Investment Profile' includes, but is not limited to, the customer's age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, and risk tolerance.
[For further details on Suitability, click on … FINRA Rule 2111.]
[For further details on Private Securities Transactions ..., click on … FINRA Rule 3280.]
[For further details on Communications with the Public ..., click on … FINRA Rule 2210(d).]
Related Stories: Investments - Private
-
A Case in Search of Some Common Sense
August 24, 2020 -
PSTs: Is There a Woodbridge Securities in Your Future?
August 13, 2020 -
Brokers’ Rocky Relationship with Private Securities Transactions [Part 1 of 2]
August 6, 2020