Document Type

Article

Publication Date

1-1-1999

Keywords

suitability rule, investor diversification, spread, risk

Abstract

This article reviews the state of the law regarding actions against broker-dealers based on the NASD suitability rule and similar theories, summarizes the theory and practice of investor diversification, explains the motivations that may lead a broker to recommend excessively risky securities and investment strategies, and discusses the various methods that may be used to quantify or compare risk, focusing in particular on how the bid-ask spread may be used as a forward-looking surrogate for the direct measurement of risk.

Publication Citation

54 Business Lawyer 1599 (1999).

Disciplines

Securities Law

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