The Requirement of "Reasonable Diligence" and "Knowing the Customer" in Securities Arbitrations.

NYSE Rule 405(1) requires investment firms to use reasonable diligence in regard to the opening and maintenance of every investment account and to know the essential facts concerning every customer. These requirements are also embodied in the new FINRA Rule 2090 (Know Your Customer). These duties of reasonable diligence and knowing the customer do not apply only to situations where the stockbroker or investment advisor has made a recommendation. Rather, they apply to all aspects of the customer relationship, from the opening of the account on. If you have suffered losses on your investments due to the actions or omissions of your stockbroker or investment advisor, you should discuss with your securities arbitration attorney how these internal, regulatory rules of FINRA may apply to your case. These rules can become powerful authorities in a securities arbitration as the panel considers what the standard of care is and whether such a standard has been satisfied in a particular case.
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