2012 Firm Element Continuing Education

1. 2012 Firm Element Continuing Education

2. Suitability & Documentation 2012 Firm Element continuing education training

3. What is Suitability? Definition of SUITABLE • “The quality of having the properties that are right for a specific purpose.” • Advantageous • Appropriate • Fit • Right www.webster-dictionary.org

4. Suitable Recommendation • New Suitability Rule effective July 9, 2012 • Use reasonable diligence to know your customer by obtaining and analyzing their needs • Must have a reasonable basis for recommendations • Suitability must be appropriate regardless if a transaction takes place • Must document the specific reason(s) the recommendation is suitable for the customer

5. Product Knowledge • You must understand the products available to determine which is the most suitable for the customer • Training required for Variable Annuities • Review product materials, prospectuses • Talk with the product sales reps • One product is NOT suitable for all customers

6. Variable Annuities • FINRA Rule 2330 requires the customer to be informed of material features and to ensure the customer would benefit from those features. • Sub-accounts must meet suitability needs, investment objective and risk tolerance • Riders must be disclosed and suitable to the customer’s needs • Document the recommendation, the reason for the recommendation and all appropriate pieces of information for the recommendation

7. Example

8. Mutual Funds • Share Class Suitability • A Share Breakpoints • Letter of Intent / Rights of Accumulation • Linking of Accounts • Near Breakpoints • 90 Day Reinstatement • B Share policy • $100,000 purchase MUST be pre-approved by Compliance • B Share worksheet required • Multiple Fund Family Purchases • If more than 3 fund families utilized with an individual customer documentation is required

9. Example

10. Principal Review • Transactions must be reviewed and approved by your OSJ • Surveillance Department reviews OSJ approvals based on transaction and suitability risk • Ensure all documents are completed accurately • Ensure suitability is well documented • If missing information or documents Surveillance will request more information from you • Failure to respond after multiple attempts Surveillance may hold commissions

11. DOCUMENT…..DOCUMENT • Document your meetings and conversations with your customers • Document your research to ensure you are meeting the customers needs • Document your recommendations and the rationale for why you selected those products Lack of Documentation = Trouble

12. Thank you for doing good clean business that is well documented. ~ ProEquities Compliance