Document Type
Article
Publication Date
January 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.
COinS
Comments
Published in The Business Lawyer, v. 54, 1999