Series 6: Chapter Seven

Chapter Seven

Recommendations, Disclosures, and Recordkeeping Responsibilities

Recall that the suitability rule requires broker-dealers to understand their customers’ investment objectives, investing experience, financial status, liquidity needs, and risk tolerance prior to recommending a transaction or implementing a strategy. More specifically, the broker-dealer must meet three obligations. It must understand the nature of the recommended security or investment strategy and its risks. It must believe that its recommendations are suitable for that particular customer. If it has control over the customer’s account, it must believe that its recommended transactions