Unsuitability
Unsuitability is a recommendation that a reasonable broker would not have made for that particular customer, given the customer’s age, income, net worth, objectives and risk tolerance. Tracy Pride Stoneman represents investors in these claims in FINRA arbitration nationwide, from Westcliffe, Colorado.
By Tracy Pride Stoneman, securities arbitration attorney Updated
| What happened | Rule or law | How it is proved |
|---|---|---|
| A recommendation that did not fit the investor’s profile | FINRA Rule 2111 (customer-specific suitability); Regulation Best Interest, 17 CFR 240.15l-1, for recommendations after June 30, 2020 | The new-account form and risk questionnaire against the trades; the broker’s contact notes |
| A product the broker did not understand | Rule 2111 reasonable-basis suitability; FINRA Regulatory Notice 12-03 on complex products | The firm’s product due-diligence file and the broker’s training records |
| Variable annuities sold to retirees | FINRA Rule 2330 | Surrender period against the customer’s age and liquidity needs; replacement and exchange forms |
| Private placements and non-traded REITs | Rule 2111; Regulatory Notice 10-22 (due diligence on Regulation D offerings) | Percentage of net worth in illiquid product; accredited-investor verification |
A FINRA panel can award compensatory damages (out-of-pocket losses or market-adjusted “well-managed account” damages), interest, costs, attorney’s fees where a statute or contract allows them, and punitive damages in egregious cases. Claims must be filed within six years of the events under FINRA Rule 12206, and shorter state statutes of limitation may also apply.
If any of this sounds like your account, the next step costs nothing: a free, honest evaluation. Tell me what happened or call (719) 783-0303.
Common questions
Unsuitability: what clients ask
What makes an investment unsuitable?
An investment is unsuitable when it does not match the customer's profile: for example, speculative products for a retiree who needs income, heavy concentration in one stock, or illiquid investments for someone who needs access to cash.
I signed forms saying I was an aggressive investor. Does that end my claim?
Not necessarily. New account forms are often filled out by the broker, and the risk tolerance listed may not reflect what you actually said or understood. Arbitrators look at your real circumstances, not just the paperwork.
What is Regulation Best Interest?
Since 2020, Regulation Best Interest has required brokers recommending investments to retail customers to act in the customer's best interest and not put their own interests ahead of the customer's.
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Tell me what happened. I will tell you honestly whether you have a case worth pursuing — and every way I can be paid, including contingency: nothing unless you recover.