Reg BI, Options, and Senior Clients: Lessons from FINRA’s Taylor AWC

FINRA’s recent Acceptance, Waiver, and Consent (AWC) involving former Oppenheimer representative Zachary Ellis Taylor is a clear reminder that options recommendations, especially short put strategies, can collide with Regulation Best Interest (Reg BI) and FINRA’s Options Rule when they are mismatched to a customer’s profile. The matter centers on recommendations to retired, moderate-risk clients to sell large amounts of puts in volatile technology stocks, resulting in heavy losses and concentrated positions. FINRA found willful violations of Reg BI’s Care Obligation, violations of FINRA Rule 2360(b)(19)(A) (the options suitability rule), and Rule 2010, and imposed a nine-month suspension (no monetary sanctions based on inability to pay).

The Facts in Brief

According to the AWC, from 2020 to 2023, Taylor recommended that at least three senior, retired customers with balanced allocation objectives and moderate risk tolerances liquidate diversified portfolios and pursue a speculative options strategy: repeatedly selling puts, often in large blocks, on high-volatility tech names. As markets moved against those stocks, puts were assigned, forcing purchases well above market price and leaving customers with large, single-stock concentrations and significant realized and unrealized losses. FINRA concluded the recommendations were neither suitable nor in the customers’ best interest given their investment profiles. The settlement notes a nine-month suspension and that Oppenheimer later settled arbitrations with two customers for a total of $420,000 (without contribution from Taylor).

Reg BI’s Care Obligation and What it Really Demands in Practice

Reg BI requires that when a broker or associated person makes a recommendation to a retail customer, they must act in that customer’s best interest at the time of the recommendation, without placing their own interests ahead of the customer’s. The Care Obligation requires reasonable diligence, care, and skill to understand potential risks, rewards, and costs, and to have a reasonable basis to believe the recommendation is in the customer’s best interest based on that customer’s investment profile (age, investments, financial situation and needs, tax status, objectives, experience, time horizon, liquidity needs, risk tolerance, and other relevant facts). The AWC emphasizes that “matching” the recommended security or strategy to the customer’s profile is central, and where the match looks less reasonable, the associated person must be able to justify why the recommendation still meets the best-interest standard.

The Options Rule FINRA Rule 2360(b)(19)(A)

Similar to Reg BI, FINRA’s options rule prohibits recommending an options transaction unless the associated person has reasonable grounds, based on a reasonable inquiry into the customer’s objectives, financial situation, and needs, as well as other known information, to believe the transaction is not unsuitable. That determination is customer-specific and strategy-specific. Short puts can be appropriate in certain contexts, but they obligate the writer to purchase shares at the strike if assigned and expose the account to potentially substantial losses far exceeding the premium received, particularly when strike prices are close to prevailing market prices or when the exposure scales across “large numbers” of contracts in a single, volatile stock.

In Taylor, FINRA highlighted how successive recommendations to sell additional, riskier puts compounded exposure and transformed moderate-risk accounts into vehicles for concentrated, high-volatility bets, an options-rule red flag that also implicates Reg BI’s best-interest analysis.

Concentration, Suitability, and Best Interest

This AWC underscores the interplay between concentration and suitability under both Rule 2360 and Reg BI. When an options strategy predictably leads to a large, single-name equity position upon assignment, the foreseeable end state of the recommendation is a key part of the analysis. In short, if the likely path of an options strategy is concentration that conflicts with a customer’s stated objectives and risk tolerance, the recommendation is hard to justify under Reg BI’s Care Obligation and FINRA’s options suitability framework.

For professionals who recommend options, this case is a blueprint for what not to do with senior, moderate-risk clients. The best-interest and options-rule analyses should begin long before the order ticket.

A robust customer-profile assessment must be more than a formality. Senior status, retirement income needs, and moderate risk tolerance require heightened scrutiny of downside exposure and liquidity risks. If a strategy’s realistic negative scenarios would jeopardize those needs, the recommendation should not be made.

Short-put strategies in volatile securities carry asymmetric risk; assignment transforms an options trade into a concentrated equity bet at the strike. Professionals should be able to articulate that path in plain language and quantify it in dollars at the account level before recommending the strategy.

Reasonable-basis and customer-specific basis must both be satisfied. It is not enough that a strategy could make sense for someone. The question is also whether it makes sense for this customer, now, in this size, with these strikes, given these holdings and cash flows.

Cost and alternatives analysis belongs in the file. Reg BI expects comparative thinking. Could the customer’s objective be met with less downside (e.g., covered calls on diversified holdings, buffered products, or simply maintaining a balanced portfolio)? If so, why is short-put concentration the best interest option?

Document the foreseeable end state. If the assignment would lead to single-name positions at 60–90% of account value, that concentration should be analyzed and rejected for moderate-risk, income-oriented retirees, absent compelling, documented reasons that square with their profile.

Sanctions and Procedural Posture

FINRA imposed a nine-month suspension in all capacities; no fine or restitution was ordered due to demonstrated inability to pay. The AWC notes that Oppenheimer settled with two customers for $420,000, without contribution from Taylor. The AWC was executed in August 2025 and includes the standard statutory-disqualification language tied to the willfulness finding. These outcomes, particularly the length of suspension for a Reg BI/Rule 2360 case with senior customers, are instructive for how FINRA is viewing options-related best-interest failures in the post-June 2020 Reg BI era.

Takeaway

Options are neither per se unsuitable nor per se non-compliant with Reg BI. But when used with senior, moderate-risk customers, strategies that can readily morph into concentrated single-stock bets face a steep best-interest hill to climb. Taylor’s AWC is a cautionary tale: if the foreseeable outcome of your recommendation is a risk profile the customer never signed up for, you haven’t satisfied Reg BI’s Care Obligation or FINRA’s Options Rule, no matter how attractive the upfront premium might look.

AMW Law PLLC represents investors and advises financial professionals and firms on supervisory systems, Reg BI compliance, options-approval processes, and FINRA enforcement defense. Our principal attorney is a former FINRA Enforcement Senior Counsel. If you have questions about Reg BI, options strategies, or supervisory obligations, we’re here to help.