FINRA Rule 2111, the new suitability rule, will become effective on July 9, 2012. In advance of this, FINRA recently released additional guidance on the new rule, via Regulatory Notice 12-25 (FINRA previously has issued two other notices relating to the rule - see Notice 11-02 and 11-25).
As the new notice indicates, much of the obligations imposed on firms and representatives is not new, however, the new rule incorporates obligations that have been enforced via disciplinary cases and interpretive releases. Specifically, the new rule requires that firms and brokers have a reasonable basis to believe that a security is suitable for some investor (reasonable basis suitability), then have a reasonable basis to believe it is suitable for that particular customer (customer specific suitability), and finally, the concept of quantitative suitability (the suitability of a series of recommended transactions) is written into the new rule. In addition, to a discussion of these three items, the notice provides further guidance to firms and brokers regarding the new rule.
I recommend that all brokers and supervisors, including compliance folks, review this new notice. It is safe to expect that once the new rule is implemented, regulators will review compliance with it, as well as the reasonableness of supervisory procedures and controls regarding complying with the rule, during routine and special exams at broker-dealers.