Section 25 Elements of a Claim for Unsuitable Recommendations

Even though a broker has a duty to make suitable recommendations through its FINRA membership, the securities laws do not provide a self-standing claim for an unsuitable recommendation; there is no private action for violating a self-regulatory organization's rule. Jablon v. Dean Witter & Co., 614 F.2d 677, 681 (9^th Cir. 1980). Although plaintiffs can base their claim on theories of negligence or misrepresentation under state law, see Minneapolis Employees Ret. Fund v. Allison-Williams Co., 519 N.W.2d 176 (Minn. 1994); Myers v. Neb. Inv. Council, 724 N.W.2d 776, 801 (Neb. 2006), most often an unsuitability claim will be brought as a federal Securities Exchange Act Rule 10b-5 claim, 17 C.F.R. § 240.10b-5. See Myers, 724 N.W.2d at 801; Banca Cremi,S.A. v. Alex. Brown & Sons,Inc., 132 F.3d 1017, 1032 (4^th Cir. 1997); see also § 8.9, supra. To prove an unsuitability claim in the context of a § 10b-5...