Customer Accounts

Question 1

The FINRA suitability rule requires all of the following

Answer 1

Reasonable Basis Suitability, customer specific suitability, and quantitative suitability.

Question 2

Reasonable Basis Suitability is

Answer 2

This is a review of the features, returns, costs and risks of the recommended product or strategy. Only those products with the best combination can be recommended to clients.

Question 3

Customer-Specific Suitability is

Answer 3

Once the recommendation has completed “reasonable basis” suitability, that does not mean that it can be recommended to all customers.

Question 4

Quantitative Suitability is

Answer 4

A single recommendation might be suitable for a customer, however a large number of similar recommendations might not be. It all depends of the customer’s objectives, needs, and ability to pay for the recommended transactions.

Question 5

A customer directs a registered representative to execute a trade which the representative believes is unsuitable for the customer. After explaining this, the customer directs that the trade be performed. The representative should:

Answer 5

Execute the order. Note his exception in the customer account file.