If I understand this correctly, FINRA is taking the position that B/Ds cannot merely rely on representations in a PPM.  They have an obligation to perform a reasonable amount of additional research to ensure that there are no skeltons in the closet that would be helpful in making an investment decision?  Is that correct? 

Or, as an example:  "We at Pegasus Brokerage have sold several deals brought by Shady Partners, and in the past we've had clients lose quite a bit of money with them.  None of that is mentioned in this PPM, since it is a different operating entity, but this is material information that we thought you might want to know when making an investment decision."  (Correct or not?)