suitability rule, investor diversification, spread, risk
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.
54 Business Lawyer 1599 (1999).
Digital Commons Citation
Booth, Richard A. Marbury Research Professor of Law, "The Suitability Rule, Investor Diversification, And Using Spread to Measure Risk" (1999). Faculty Scholarship. 102.