(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 information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, 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 customer may disclose to the member or associated person in connection with such recommendation.
As to particular investments, FINRA further elaborates that: Brokers must have a firm understanding of both the product and the customer, according to Rule 2111. The lack of such an understanding itself violates the suitability rule.
Reasonable-basis suitability requires a broker to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. Reasonable diligence must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.
This brings me back to cryptocurrencies in general, and Bitcoin in specific. As I, and many other commentators have previously noted, Bitcoin has no intrinsic value and thus is utterly incapable of rationally being valued at anything but zero, other than the naked current market price which is based on the purest speculation as to where the stock price may go in the future.
And, no, Bitcoin is not like a $1 bill or any other governmental currency in this respect, since those can be used if for no other purpose to pay tax liability to the government, while Bitcoin can’t. Thus, Bitcoin has become the ultimate speculative investment because there is nothing externally which drives its price, i.e., Bitcoin has no earnings, and thus no quarterly projections to hit or miss. Read more from forbes.com…
thumbnail courtesy of forbes.com