Recommendations, Communications, and Customer Account Supervision
Retail and institutional customer activity
Recommendations to retail customers run through Regulation Best Interest: the care obligation (understand the product, consider reasonably available alternatives and cost), disclosure, conflict of interest, and compliance obligations. Rule 2111 suitability still governs institutional accounts, and Rule 2090 (know your customer) applies to every account. The exam favorite: Reg BI covers natural persons and their legal representatives, not institutions, and 'reasonably available alternatives' is broader than a bare suitability check.
Rule 2210 classifies correspondence (25 or fewer retail investors in any 30-day period), retail communications (more than 25), and institutional communications. Principals must approve retail communications before use; many must be filed with FINRA Advertising Regulation within 10 business days of first use; new members file all retail communications during their first year. Content must be fair and balanced, with no misleading performance or exaggerated claims.
Account mechanics: written discretionary authorization approved by the firm, although a first trade on oral discretion may be accepted if written authorization follows promptly. Confirmations under Rule 10b-10 at or before completion; statements at least quarterly; SIPC coverage of $500,000 including $250,000 cash; margin and options approvals; ACATS transfers; senior investor protections under Rule 2165 (temporary hold on disbursements) and Rule 4512 (trusted contact); Reg S-P privacy.
Rule of thumb: when a recommendation reaches a retail customer, write the file as though Reg BI, not mere suitability, is the test. Worked example: a representative proposes a complex variable annuity with a long surrender schedule for a 78-year-old client. The care obligation requires documenting costs, alternatives, and the client's shorter horizon; 'it was suitable' is not a defense.