What Is Suitability?
The regulatory requirement that broker-dealers recommend securities and investment strategies appropriate for a customer's financial situation, investment objectives, and risk tolerance. Firms must document the basis for their recommendations and ensure advice aligns with what they know about the customer, not just what generates commissions.
Suitability across 5 exams
Suitability appears on the following exams. Each defines it in the context candidates are tested on:
- SIE
- The regulatory requirement that broker-dealers recommend securities and investment strategies appropriate for a customer's financial situation, investment objectives, and risk tolerance. Firms must document the basis for their recommendations and ensure advice aligns with what they know about the customer, not just what generates commissions.
- Series 63
- The regulatory requirement that securities recommendations be appropriate for a customer's financial situation, investment objectives, and risk tolerance. Broker-dealers and investment advisers must maintain reasonable basis and customer-specific suitability before recommending any security.
- Series 66
- The regulatory requirement that securities recommendations be appropriate for a client based on their financial situation, investment objectives, risk tolerance, and time horizon. Suitability is a foundational concept for the Series 66 exam, as violations are among the most commonly cited regulatory deficiencies.
- Series 9/10
- The requirement that a recommended securities transaction or strategy be appropriate for a specific customer based on their financial situation, objectives, risk tolerance, and other profile information. Supervisors must review recommendations to confirm they meet suitability obligations.
- Series 31
- The regulatory requirement that a registrant recommend or service an investment only if it is appropriate for the client's financial situation, investment objectives, risk tolerance, and time horizon. Series 31 registrants must ensure managed futures accounts are suitable before soliciting investor participation.