Guide to Broker-Dealer Registration

							Referências nos EUA para Verificação da Adequação ao Cliente (Suitability)

    • Legislação básica
Regulatory Notice 09-25 - Suitability and “Know Your Customer” Proposed Consolidated
FINRA Rules Governing Suitability and Know-Your-Customer Obligations – May 2009
http://finra.complinet.com/net_file_store/new_rulebooks/f/i/finra_09-25.pdf


NASD (FINRA) Rule 2310 –
http://finra.complinet.com/en/display/display.html?rbid=2403&element_id=3638


NFA Compliance Rules - RULE 2-30. CUSTOMER INFORMATION AND RISK
DISCLOSURE.
http://www.nfa.futures.org/NFAManual/NFAManual.aspx?RuleID=RULE%202-30&Section=4
Interpretive Notices:
Interpretive Notice NFA Compliance Rule 2-30: Customer Information and Risk Disclosure (Board
of Directors)
Interpretive Notice NFA Compliance Rule 2-30: Customer Information and Risk Disclosure (Staff).

CFTC Regulation 1.55 http://ecfr.gpoaccess.gov/cgi/t/text/text-
idx?c=ecfr;sid=100126a588bb78abf8f21c7a1fb2bd35;rgn=div5;view=text;node=17%3A1.0.1.1.1;i
dno=17;cc=ecfr#17:1.0.1.1.1.0.6.47
+ Risk Disclosure Statement for Futures and Options
http://www.access.gpo.gov/ecfr/graphics/pdfs/ec05oc91.028.pdf

CFTC Regulation 33.7 http://ecfr.gpoaccess.gov/cgi/t/text/text-
idx?c=ecfr;sid=100126a588bb78abf8f21c7a1fb2bd35;rgn=div5;view=text;node=17%3A1.
0.1.1.24;idno=17;cc=ecfr#17:1.0.1.1.24.0.7.7


   •   Outros textos sobre o assunto:

A Joint Report of the SEC and the CFTC on Harmonization of Regulation - October
16, 2009 – CFTC and SEC Report - pages 8 and 62 to 72
http://www.sec.gov/news/press/2009/cftcjointreport101609.pdf

Conduct Regulation of Broker Dealers - Guide to Broker-Dealer Registration – Division
of Trading and Markets - U.S. Securities and Exchange Commission April 2008; Section
V/A (Antifraud Provision)/2 (Suitability Requirements)
http://www.sec.gov/divisions/marketreg/bdguide.htm#V


   •   Íntegra dos artigos da legislação (FINRA/NFA) citados:
Regulatory Notice 09-25 - Suitability and “Know Your Customer” Proposed Consolidated
FINRA Rules - FINRA 2111 Rule

“2100. TRANSACTIONSWITH CUSTOMERS [GENERAL STANDARDS]
(...)
2110. Recommendations
2111. Suitability
(a) A member or an associated person must have a reasonable basis to believe that a
recommended transaction or investment strategy involving a security or securities is
suitable for the customer, based on the facts known by the member or associated person or
disclosed by the customer in response to the member’s or associated person’s reasonable
efforts to obtain information concerning the customer’s age, other investments, financial
situation and needs, tax status, investment objectives, investment experience, investment
time horizon, liquidity needs, risk tolerance, and any other information the member or
associated person considers to be reasonable in making recommendations.
(b) A member or associated person fulfills the customer-specific suitability obligation for
an institutional account, as defined in NASD Rule 3110(c)(4), if (1) the institutional
customer affirmatively indicates that it is willing to forego the protection of the customer-
specific obligation of the suitability rule and (2) the member or associated person has a
reasonable basis to believe that the institutional customer is (A) capable of evaluating
investment risks independently, both in general and with regard to particular transactions
and investment strategies involving a security or securities and (B) exercising independent
judgment in evaluating the member’s or associated person’s recommendations. Where an
institutional customer has delegated decision-making authority to an agent, such as an
investment advisor or a bank trust department, these factors shall be applied to the agent.

Supplementary Material:
.01 General Principles. Implicit in all member and associated person relationships with
customers and others is the fundamental responsibility for fair dealing. Sales efforts must
therefore be undertaken only on a basis that can be judged as being within the ethical
standards of FINRA’s rules, with particular emphasis on the requirement to deal fairly with
the public. The suitability rule is fundamental to fair dealing and is intended to promote
ethical sales practices and high standards of professional conduct.
.02 Components of Suitability Obligations. There are three main suitability obligations
under Rule 2111: reasonable-basis suitability, customer-specific suitability and quantitative
suitability. The reasonable-basis obligation requires a member or associated person to have
a reasonable basis to believe, based on adequate due diligence, that the recommendation is
suitable for at least some investors. In general, what constitutes adequate due diligence will
vary depending on, among other things, the complexity of and risks associated with the
security or investment strategy and the member’s or associated person’s familiarity with the
security or investment strategy.
The customer-specific obligation requires that a member or associated person have
reasonable grounds to believe that the recommendation is suitable for a particular customer
based on that customer’s profile, as delineated in Rule 2111(a). Quantitative suitability
requires a member or associated person who has actual or de facto control over a customer
account to have a reasonable basis for believing that a series of recommended transactions,
even if suitable when viewed in isolation, are not excessive and unsuitable for the customer
when taken together in light of the customer’s profile, as delineated in Rule 2111(a). No
single test defines excessive activity, but factors such as the turnover rate, the cost-equity
ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a
finding that a member or associated person has violated the quantitative suitability
obligation.
.03 Customers’ Financial Ability. Rule 2111 prohibits a member or associated person from
recommending a transaction or investment strategy involving a security or securities or the
continuing purchase of a security or securities or use of an investment strategy involving a
security or securities if such recommendation is inconsistent with the reasonable
expectation that the customer has the financial ability to meet such a commitment.”

NASD (FINRA) Rule 2310
2310. Recommendations to Customers (Suitability)
(a) In recommending to a customer the purchase, sale or exchange of any security, a
member shall have reasonable grounds for believing that the recommendation is suitable for
such customer upon the basis of the facts, if any, disclosed by such customer as to his other
security holdings and as to his financial situation and needs.
(b) Prior to the execution of a transaction recommended to a non-institutional customer,
other than transactions with customers where investments are limited to money market
mutual funds, a member shall make reasonable efforts to obtain information concerning:
(1) the customer's financial status;
(2) the customer's tax status;
(3) the customer's investment objectives; and
(4) such other information used or considered to be reasonable by such member or
registered representative in making recommendations to the customer.
(c) For purposes of this Rule, the term "non-institutional customer" shall mean a customer
that does not qualify as an "institutional account" under Rule 3110(c)(4).
Amended by SR-NASD-95-39 eff. Aug. 20, 1996.
Amended by SR-NASD-90-09 and SR-NASD-90-39 May 2, 1990 eff. for accounts opened
and recommendations made after Jan. 1, 1991.
Selected Notices: 90-12, 90-52, 96-60, 96-86, 01-23, 05-59.



IM-2310-1. Possible Application of SEC Rules 15g-1 through 15g-9
Members should be aware that any transaction that involves a non-exchange-listed equity
security trading for less than five dollars per share may be subject to the provisions of SEC
Rules 15g-1 through 15g-9, and those Rules should be reviewed to determine if an executed
customer suitability agreement is required.
Accounts opened, and recommendations made, prior to January 1, 1991 remain subject to
former Article III, Sections 2 and 21(c) of the Rules of Fair Practice as previously in effect,
as set forth in Notice to Members 90-52 (August 1990).
Amended by SR-NASD-2005-087 eff. Aug. 1, 2006
IM-2310-2. Fair Dealing with Customers
(a)(1) Implicit in all member and registered representative relationships with customers and
others is the fundamental responsibility for fair dealing. Sales efforts must therefore be
undertaken only on a basis that can be judged as being within the ethical standards of the
Association's Rules, with particular emphasis on the requirement to deal fairly with the
public.
(2) This does not mean that legitimate sales efforts in the securities business are to be
discouraged by requirements which do not take into account the variety of circumstances
which can enter into the member-customer relationship. It does mean, however, that sales
efforts must be judged on the basis of whether they can be reasonably said to represent fair
treatment for the persons to whom the sales efforts are directed, rather than on the argument
that they result in profits to customers.
(b) District Business Conduct Committees and the Board of Governors have interpreted the
Rules, taken disciplinary action and imposed penalties in many situations where members'
sales efforts have exceeded the reasonable grounds of fair dealing. Some practices that have
resulted in disciplinary action and that clearly violate this responsibility for fair dealing are
set forth below, as a guide to members:
(1) Recommending Speculative Low-Priced Securities
Recommending speculative low-priced securities to customers without knowledge of or
attempt to obtain information concerning the customers' other securities holdings, their
financial situation and other necessary data. The principle here is that this practice, by its
very nature, involves a high probability that the recommendation will not be suitable for at
least some of the persons solicited. This has particular application to high pressure
telephone sales campaigns.
(2) Excessive Trading Activity
Excessive activity in a customer's account, often referred to as "churning" or "overtrading."
There are no specific standards to measure excessiveness of activity in customer accounts
because this must be related to the objectives and financial situation of the customer
involved.
(3) Trading in Mutual Fund Shares
Trading in mutual fund shares, particularly on a short-term basis. It is clear that normally
these securities are not proper trading vehicles and such activity on its face may raise the
question of Rule violation.
(4) Fraudulent Activity
(A) Numerous instances of fraudulent conduct have been acted upon by the Association
and have resulted in penalties against members. Among some of these activities are:
(i) Fictitious Accounts
Establishment of fictitious accounts in order to execute transactions which otherwise would
be prohibited, such as the purchase of hot issues, or to disguise transactions which are
against firm policy.
(ii) Discretionary Accounts
Transactions in discretionary accounts in excess of or without actual authority from
customers.
(iii) Unauthorized Transactions
Causing the execution of transactions which are unauthorized by customers or the sending
of confirmations in order to cause customers to accept transactions not actually agreed
upon.
(iv) Misuse of Customers' Funds or Securities
Unauthorized use or borrowing of customers' funds or securities.
(B) In addition, other fraudulent activities, such as forgery, non-disclosure or misstatement
of material facts, manipulations and various deceptions, have been found in violation of
Association Rules. These same activities are also subject to the civil and criminal laws and
sanctions of federal and state governments.
(5) Recommending Purchases Beyond Customer Capability
Recommending the purchase of securities or the continuing purchase of securities in
amounts which are inconsistent with the reasonable expectation that the customer has the
financial ability to meet such a commitment.
(c) While most members are fully aware of the fairness required in dealing with customers,
it is anticipated that the practices enumerated in paragraph (b), which are not all inclusive,
will be of future assistance in the training and education of new personnel.
(d) The Commission has also recognized that brokers and dealers have an obligation of fair
dealing in actions under the general anti-fraud provisions of the federal securities laws. The
Commission bases this obligation on the principle that when a securities dealer opens his
business he is, in effect, representing that he will deal fairly with the public. Certain of the
Commission's cases on fair dealing involve practices not covered in the foregoing
illustrations. Usually, any breach of the obligation of fair dealing as determined by the
Commission under the anti-fraud provisions of the securities laws could be considered a
violation of the Association's Rules.
(e) Fair Dealing with Customers with Regard to Derivative Products or New Financial
Products
The Board emphasizes members' obligations for fair dealing with customers when making
recommendations or accepting orders for new financial products. As new products are
introduced from time to time, it is important that members make every effort to familiarize
themselves with each customer's financial situation, trading experience, and ability to meet
the risks involved with such products and to make every effort to make customers aware of
the pertinent information regarding the products. Members must follow specific guidelines,
set forth below, for qualifying the accounts to trade the products and for supervising the
accounts thereafter.
(1) Security Futures
Members must comply with the Rules, regulations and procedures applicable to security
futures contained in Rule 2865.
(2) Index Warrants
Members are obliged to comply with the Rules, regulations and procedures applicable to
index warrants and foreign currency warrants contained in the Rule 2840 Series.
(3) Hybrid Securities and Selected Equity-Linked Debt Securities ("SEEDS") Listed
on Nasdaq as Global Market Securities
With respect to Hybrid Securities and Selected Equity-Linked Debt Securities ("SEEDS")
that have been listed as Nasdaq Global Market Securities, members are obligated to comply
with any Rules, regulations, or procedures applicable to such securities.
Amended by SR-NASD-2006-087 eff. Aug. 1, 2006.
Amended by SR-NASD-2005-087 eff. Aug. 1, 2006.
Amended by SR-NASD-2002-40 eff. Oct. 15, 2002.
Amended by SR-NASD-95-37 eff. Sept. 28, 1995.
Amended by SR-NASD-94-49 eff. Sept. 30, 1994.
Amended by SR-NASD-91-48 eff. June 11, 1992.
Selected Notices: 90-52, 94-62, 95-21, 96-32, 96-60.



IM-2310-3. Suitability Obligations to Institutional Customers
                    Preliminary Statement as to Members' Obligations
As a result of broadened authority provided by amendments to the Government Securities
Act adopted in 1993, the Association is extending its sales practice rules to the government
securities market, a market with a particularly broad institutional component. Accordingly,
the Association believes it is appropriate to provide further guidance to members on their
suitability obligations when making recommendations to institutional customers. The
Association believes this interpretation is applicable not only to government securities but
to all debt securities, excluding municipals.1 Furthermore, because of the nature and
characteristics of the institutional customer/member relationship, the Association is
extending this interpretation to apply equally to the equity securities markets as well.
The Association's suitability rule is fundamental to fair dealing and is intended to promote
ethical sales practices and high standards of professional conduct. Members' responsibilities
include having a reasonable basis for recommending a particular security or strategy, as
well as having reasonable grounds for believing the recommendation is suitable for the
customer to whom it is made. Members are expected to meet the same high standards of
competence, professionalism, and good faith regardless of the financial circumstances of
the customer.
Rule 2310(a) requires that, In recommending to a customer the purchase, sale or exchange
of any security, a member shall have reasonable grounds for believing that the
recommendation is suitable for such customer upon the basis of the facts, if any, disclosed
by such customer as to his other security holdings and as to his financial situation and
needs.
This interpretation concerns only the manner in which a member determines that a
recommendation is suitable for a particular institutional customer. The manner in which a
member fulfills this suitability obligation will vary depending on the nature of the customer
and the specific transaction. Accordingly, this interpretation deals only with guidance
regarding how a member may fulfill such "customer-specific suitability obligations" under
Rule 2310(a).2
While it is difficult to define in advance the scope of a member's suitability obligation with
respect to a specific institutional customer transaction recommended by a member, the
Board has identified certain factors which may be relevant when considering compliance
with Rule 2310(a). These factors are not intended to be requirements or the only factors to
be considered but are offered merely as guidance in determining the scope of a member's
suitability obligations.

Considerations Regarding the Scope of Members' Obligations to Institutional
Customers
The two most important considerations in determining the scope of a member's suitability
obligations in making recommendations to an institutional customer are the customer's
capability to evaluate investment risk independently and the extent to which the customer is
exercising independent judgment in evaluating a member's recommendation. A member
must determine, based on the information available to it, the customer's capability to
evaluate investment risk. In some cases, the member may conclude that the customer is not
capable of making independent investment decisions in general. In other cases, the
institutional customer may have general capability, but may not be able to understand a
particular type of instrument or its risk. This is more likely to arise with relatively new
types of instruments, or those with significantly different risk or volatility characteristics
than other investments generally made by the institution. If a customer is either generally
not capable of evaluating investment risk or lacks sufficient capability to evaluate the
particular product, the scope of a member's customer-specific obligations under the
suitability rule would not be diminished by the fact that the member was dealing with an
institutional customer. On the other hand, the fact that a customer initially needed help
understanding a potential investment need not necessarily imply that the customer did not
ultimately develop an understanding and make an independent investment decision.
A member may conclude that a customer is exercising independent judgment if the
customer's investment decision will be based on its own independent assessment of the
opportunities and risks presented by a potential investment, market factors and other
investment considerations. Where the broker-dealer has reasonable grounds for concluding
that the institutional customer is making independent investment decisions and is capable
of independently evaluating investment risk, then a member's obligation to determine that a
recommendation is suitable for a particular customer is fulfilled.3 Where a customer has
delegated decision-making authority to an agent, such as an investment advisor or a bank
trust department, this interpretation shall be applied to the agent.
A determination of capability to evaluate investment risk independently will depend on an
examination of the customer's capability to make its own investment decisions, including
the resources available to the customer to make informed decisions. Relevant
considerations could include:
• the use of one or more consultants, investment advisers or bank trust departments;
• the general level of experience of the institutional customer in financial markets and
specific experience with the type of instruments under consideration;
• the customer's ability to understand the economic features of the security involved;
• the customer's ability to independently evaluate how market developments would affect
the security; and
• the complexity of the security or securities involved.
A determination that a customer is making independent investment decisions will depend
on the nature of the relationship that exists between the member and the customer. Relevant
considerations could include:
• any written or oral understanding that exists between the member and the customer
regarding the nature of the relationship between the member and the customer and the
services to be rendered by the member;
• the presence or absence of a pattern of acceptance of the member's recommendations;
• the use by the customer of ideas, suggestions, market views and information obtained
from other members or market professionals, particularly those relating to the same type of
securities; and
• the extent to which the member has received from the customer current comprehensive
portfolio information in connection with discussing recommended transactions or has not
been provided important information regarding its portfolio or investment objectives.
Members are reminded that these factors are merely guidelines which will be utilized to
determine whether a member has fulfilled its suitability obligations with respect to a
specific institutional customer transaction and that the inclusion or absence of any of these
factors is not dispositive of the determination of suitability. Such a determination can only
be made on a case-by-case basis taking into consideration all the facts and circumstances of
a particular member/customer relationship, assessed in the context of a particular
transaction.
For purposes of this interpretation, an institutional customer shall be any entity other than a
natural person. In determining the applicability of this interpretation to an institutional
customer, the Association will consider the dollar value of the securities that the
institutional customer has in its portfolio and/or under management. While this
interpretation is potentially applicable to any institutional customer, the guidance contained
herein is more appropriately applied to an institutional customer with at least $10 million
invested in securities in the aggregate in its portfolio and/or under management.

1
    Rules for municipal securities are promulgated by the Municipal Securities Rulemaking Board.
2
  This interpretation does not address the obligation related to suitability that requires that a member have "...
a 'reasonable basis' to believe that the recommendation could be suitable for at least some customers." In the
Matter of the Application of F.J. Kaufman and Company of Virginia and Fredrick J. Kaufman, Jr. 50 SEC 164
(1989).
3
    See note 2.

Adopted by SR-NASD-95-39 eff. Aug. 20, 1996.
Selected Notices: 94-62, 95-21.



NFA Compliance Rules
RULE 2-30. CUSTOMER INFORMATION AND RISK DISCLOSURE.
[Adopted effective June 1, 1986. Effective date of amendments: January 1, 1990, August 21,
2001 December 10, 2002, December 17, 2007]
        (a) Each Member or Associate shall, in accordance with the provisions of this Rule,
obtain information about its futures customers who are individuals and provide such
customers with disclosure of the risks of futures trading.
        (b) The Member or Associate shall exercise due diligence to obtain the information
and shall provide the risk disclosure at or before the time a customer first opens a futures
trading account to be carried or introduced by the Member, or first authorizes the Member
to direct trading in a futures account for the customer. A Member registered as a broker or
dealer under Section 15(b)(11) of the Exchange Act shall provide a copy of the disclosure
statement for security futures products at or before the time the Member approves the
account to trade security futures products.
        (c) The information to be obtained from the customer shall include at least the
following:
(1) the customer's true name and address, and principal occupation or business;
(2) the customer's current estimated annual income and net worth;
(3) the customer's approximate age; and
(4) an indication of the customer's previous investment and futures trading experience;
In addition, Members that are not also members of the Financial Industry Regulatory
Authority and their Associates must obtain the following information from each customer
who is an individual if the customer trades security futures products:
(5) whether the customer's account is for speculative or hedging purposes;
(6) the customer's employment status (e.g., name of employer, self-employed, retired);
(7) the customer's estimated liquid net worth (cash, securities, other);
(8) the customer's marital status and number of dependents;
(9) such other information used or considered to be reasonable by such Member or
Associate in making recommendations to the customer.
        (d) The risk disclosure to be provided to the customer shall include at least the
following:
(1) the Risk Disclosure Statement required by CFTC Regulation 1.55, if the Member is
required by that Regulation to provide it;
(2) the Disclosure Document required by CFTC Regulation 4.31, if the Member is required
by that Regulation to provide it;
(3) the Options Disclosure Statement required by CFTC Regulation 33.7, if the Member is
required by that Regulation to provide it; and
(4) the Disclosure Document required by CFTC Regulation 31.11, if the Member is
required by that Regulation to provide it.
        (e) In the case of an account which is introduced by an FCM or IB or for which a
CTA directs trading, and except as otherwise provided in subsections (b) and (j), it shall be
the responsibility of the Member soliciting the account to comply with this Rule.
        (f) A Member or Associate shall be entitled to rely on the customer [as the sole
source] for the information obtained under Section (c) of this Rule and shall not be required
to verify such information, except as provided in section (j)(2) of this rule.
        (g) Each Member or Associate shall make or obtain a record containing the
information obtained under Section (c) of this Rule at the time the information is obtained.
If a customer declines to provide the information set forth in Section (c) of this Rule, the
Member or Associate shall make a record that the customer declined, except that such a
record need not be made in the case of a non-U.S. customer unless such customer trades
security futures products. Subject to the provisions of Section (i) of this Rule, a Member
may open, introduce or agree to direct a futures trading account for a customer only upon
the approval of a partner, officer, director, branch office manager or supervisory employee
of the Member. Each Member shall keep copies of all records made pursuant to this Rule in
the form and for the period of time set forth in CFTC Regulation 1.31.
        (h) Each Member shall establish and enforce adequate procedures to review all
records made pursuant to this Rule and to supervise the activities of its Associates in
obtaining customer information and providing risk disclosure.
        (i) Nothing herein shall relieve any Member from the obligation to comply with all
applicable CFTC and SEC Regulations and NFA Requirements.
        (j) Members that are not also members of the Financial Industry Regulatory
Authority and their Associates shall adhere to the following additional requirements
relating to accounts for customers that trade security futures products:
(1) A Member shall exercise due diligence to learn the essential facts relative to the
customer, including the customer's investment objectives and financial situation and, based
upon those facts (including any information obtained under subsection (c) of this Rule, if
applicable), a partner, officer, director, branch office manager, or supervisory employee of
the Member shall approve or disapprove the customer's account for security futures
transactions. If the Member is an FCM or IB, the account must be approved or disapproved
by a designated security futures principal. The approval or disapproval shall be in writing
and shall identify the person approving or disapproving the account. Additionally, the
customer's account records shall contain information about the account, including the name
of the Associate, how the customer's information was obtained, and the date that the
disclosure statement for security futures products was provided.
(2) A Member or Associate shall forward the background and financial information upon
which the customer's account has been approved for trading security futures products to
each customer who is an individual, unless the information has been obtained in writing
from the customer, for verification of accuracy within fifteen days after the customer's
account has been approved. A copy of the background and financial information on file
with the Member shall also be sent to each customer who is an individual for verification
within fifteen days after the Member becomes aware of any material change in the
customer's financial status. In all cases, absent notice to the contrary from the customer, the
information is deemed verified.
(3) No FCM or IB Member or Associate thereof shall recommend to a non-institutional
customer a transaction in security futures products or a particular trading strategy relating
to such products without making reasonable efforts to obtain current information regarding
the customer's financial status and investment objectives; provided, however, that this
requirement does not apply to transactions in discretionary accounts. For purposes of this
requirement, a non-institutional customer is any customer who is not:
        (i) a bank, savings and loan association, insurance company, registered investment
company, a registered commodity pool operator, or a commodity pool operated by a
registered commodity pool operator;
        (ii) an investment advisor registered either with the Securities and Exchange
Commission under Section 203 of the Investment Advisers Act of 1940 or with a state
securities commission (or any agency or office performing like functions) or a registered
commodity trading advisor;
        (iii) an investment company exempt from registration under the Investment
Company Act of 1940, a commodity pool operator exempt from registration under the
Commodity Exchange Act, a commodity pool operated by a commodity pool operator
exempt from registration under the Commodity Exchange Act, an investment advisor
exempt from both federal and state registration under the Investment Advisers Act of 1940,
or a commodity trading advisor exempt from registration under the Commodity Exchange
Act;
        (iv) a registered broker-dealer or futures commission merchant; or
        (v) any other entity (whether a natural person, corporation, partnership, trust, or
otherwise) with total assets of at least $50 million.
(4) No FCM or IB Member or Associate thereof shall recommend to any customer a
transaction in security futures products or a particular trading strategy relating to such
products without reasonable grounds for believing that the recommendation or strategy is
not unsuitable for the customer on the basis of the customer's current investment objectives,
financial situation and needs, and any other information known by the Member or
Associate.
(5) No FCM or IB Member or Associate shall recommend a security futures transaction to a
customer unless the person making the recommendation has a reasonable basis for
believing, at the time of making the recommendation, that the customer has such
knowledge and experience in financial matters that the customer may reasonably be
expected to be capable of evaluating the risks of the recommended transaction, and is
financially able to bear the risks of the recommended transaction.
(6) No Member or Associate exercising discretion over an account may effect security
futures transactions that are excessive in size or frequency in view of the customer's
investment objectives and financial situation.