SIFMA Develops New Institutional Suitability Certificate to Facilitate Compliance with New FINRA Suitability Requirements
Washington, DC, February 23, 2012—SIFMA today announced it has developed a new Institutional Suitability Certificate to facilitate broker-dealer compliance with new FINRA Rule 2111, specifically when dealing with institutional clients.
FINRA Rule 2111 establishes new suitability requirements that broker-dealers must satisfy when recommending transactions or investment strategies involving securities to clients. The rule provides an exception from the “customer-specific” suitability obligation for institutional accounts (as defined in FINRA Rule 4512(c)) that are capable of evaluating risks independently and affirmatively indicate to broker-dealers that they are exercising independent judgment in evaluating a firm’s securities recommendations.[i] The Institutional Suitability Certificate is a simple form that institutional clients can sign to make this indication.
“SIFMA is pleased to make the Institutional Suitability Certificate available for use by our members and all broker-dealer firms and their clients,” said Ira Hammerman, SIFMA senior managing director and general counsel. “This form will provide an efficient way for institutional investors to elect to be treated as an institutional account by their broker-dealer(s), with access to the full range of products and services available on their broker-dealer’s institutional platform.”
The Institutional Suitability Certificate is available here and will be distributed and maintained by various vendors starting on or about March 1, 2012.
The deadline for compliance with FINRA Rule 2111 is July 9, 2012.
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The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMA’s mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.
[i]Supplementary Material .07 to Rule 2111 states that an institutional customer may indicate that it is exercising independent judgment (1) on a trade-by-trade basis, (2) on an asset-class-by-asset-class basis, or (3) in terms of all potential transactions for its account. The Certificate is drafted to address the third alternative.