Putting It Together: Which Rule Applies?

The preceding sections introduced FINRA Rule 2111, Reg BI, Form CRS, Rule 2214, and MSRB G-19 as separate rules. On the Series 6 exam, the real work is matching the fact pattern to the governing standard. This section is the decision map.

Is there a recommendation triggering Reg BI or Rule 2111?

Before any suitability standard attaches, ask: was a recommendation made?

• No recommendation (customer-directed, unsolicited trade only): no suitability obligation under 2111 or Reg BI. FINRA 2090 (KYC) still applies.
• Yes, a recommendation (buy, sell, hold, or strategy): Rule 2111 or Reg BI applies, depending on who the customer is.

Exam Tip: Gotchas

• The trigger for Reg BI and Rule 2111 is a RECOMMENDATION, not just account opening or a customer conversation. A customer who walks in, asks for a specific fund by name, and places an order with no advice has not triggered Reg BI or 2111 - but KYC under Rule 2090 still applies, and a later hold recommendation would restart the analysis under Rule 2111.03.

Who is the customer for suitability purposes?

Retail Customer

• A natural person (or a non-professional legal representative of one)
• Uses the recommendation primarily for personal, family, or household purposes

-> Reg BI applies. Reg BI absorbs and exceeds Rule 2111. Form CRS must be delivered per the CRS triggers.

Institutional Customer Meeting Rule 2111(b)

• Meets the Rule 4512(c) definition (listed entity OR $50M+ in assets)
• Firm has a reasonable basis to believe the customer evaluates risk independently
• Customer affirmatively indicates independent judgment

-> FINRA Rule 2111 applies, with customer-specific waived. Reasonable-basis always applies.

Non-Retail Customer NOT Meeting Rule 2111(b)

• Entity or account that is not a Reg BI retail customer AND does not qualify for 2111(b)

-> FINRA Rule 2111 applies in full (reasonable-basis + customer-specific + quantitative, where control exists).

Which suitability rule applies to each recommendation scenario?

Think of it this way: The rules stack rather than replace. A retail customer buying a 529 plan with the help of a Monte Carlo tool is governed by Reg BI (conduct), Form CRS (disclosure), MSRB G-19 (muni parallel, satisfied by Reg BI), and FINRA Rule 2214 (tool disclosures). Each rule answers a different question; all must be satisfied.

Which rules apply to a retail customer 529 plan recommendation?

Fact pattern: a registered rep recommends a 529 college savings plan share class to an individual customer funding a grandchild's education.

• Recommendation made? Yes.
• Retail customer? Yes, a natural person using the account for a family member's education (household/family purposes).
• Rules that attach:
  • Reg BI - Disclosure, Care, Conflict of Interest, Compliance Obligations
  • Form CRS - deliver at or before the recommendation (new retail investor or existing retail customer trigger, depending on the prior relationship)
  • MSRB G-19 - muni parallel, satisfied by Reg BI compliance for this retail customer
  • FINRA Rule 2111 - absorbed by Reg BI Care Obligation
  • FINRA Rule 2090 (KYC) - ongoing, always

Note the pattern: retail + muni recommendation activates Reg BI + CRS + G-19 in one stack. Compliance with Reg BI is the spine.

Which rules apply to a non-qualifying trust recommendation?

Fact pattern: a small institutional trust with $3 million in assets (not at the $50M threshold) is recommended a mutual fund.

• Recommendation made? Yes.
• Retail customer under Reg BI? The trust is not a natural person, so no.
• Rule 2111(b) institutional exemption? Not met - the trust has only $3M in assets, well under the $50M threshold.
• Rules that attach:
  • FINRA Rule 2111 - full three-layer suitability (reasonable-basis, customer-specific, quantitative where control exists)
  • FINRA Rule 2090 (KYC) - ongoing, always
• Reg BI and Form CRS do NOT apply because the customer is not retail
• MSRB G-19 does NOT apply because the recommendation is for a mutual fund, not a municipal security

Exam Tip: Gotchas

• $50M threshold matters for the 2111(b) exemption. A $3M trust does not qualify, so customer-specific suitability is NOT waived. The rep must still perform the full three-layer Rule 2111 analysis, including customer-specific review of the trust's profile.

Which rules apply to a hold recommendation on an unsolicited purchase?

Fact pattern: the customer bought a fund two years ago with no rep input. Today the customer asks "Should I stay in?" and the rep says "Yes."

• Recommendation made? Yes - the rep's "Yes, stay in" is a hold recommendation under Rule 2111.03.
• Retail customer? Assume yes, a natural person.
• Rules that attach:
  • Reg BI Care Obligation, evaluated under the customer's current profile, not the profile at the time of the original purchase
  • Rule 2111 - absorbed by Reg BI for retail; three-layer analysis applied to the hold decision
  • Rule 2090 (KYC) - ongoing

The trap: the rep did not originate the position, but the rep did recommend holding it. The original unsolicited purchase does not inoculate the later hold advice.

Exam Tip: Gotchas

• The hold recommendation starts a fresh Reg BI or Rule 2111 analysis. The rep who says "yes, stay in" two years after an unsolicited purchase is now the source of a recommendation. The customer's current profile controls, and failure to verify the current profile is the recurring enforcement theme in hold cases.

What are the key decision-map takeaways for suitability rules?

Exam Tip: Gotchas

• Start by asking whether a recommendation was made. No recommendation -> no suitability duty (but KYC still applies).
• Retail customer -> Reg BI; institutional -> Rule 2111 (with possible 2111(b) waiver).
• Muni products (529, LGIP, ABLE) activate G-19; Reg BI compliance satisfies G-19 for retail customers.
• Investment analysis tools attach Rule 2214 separately from whichever suitability rule governs the downstream recommendation.
• Hold recommendations count, and the rep evaluates them under the current profile.
• Form CRS delivery sits alongside Reg BI and triggers on rollovers and new-service recommendations even without a new account.