The move by the Investment Dealers Association to relax suitability rules has been approved by its board of directors, effective immediately.

Under the rule change a dealer’s obligation to make a suitability determination will apply only to securities that have been recommended by the dealer.

A suitability determination will not be required where the dealer acts solely as an order-taker for a client on a particular transaction who, on their own initiative, executes a trade without a recommendation.

The rule change will apply to both discount brokers that offer solely an order execution service, and to full service brokers who offer both an advisory service and an order execution only service.

In order for a firm to take advantage of the rule change it must receive approval from the IDA, complying with some additional supervisory requirements.

Concurrent with the rule change, the IDA has published a notice to help firms determine what may or may not constitute a recommendation.