Question 1

Under FINRA Rule 2111, what are the three components of the suitability obligation?

Accepted Answer

Reasonable-basis suitability, customer-specific suitability, and quantitative suitability.

Question 2

What does 'reasonable-basis suitability' require of a registered representative?

Accepted Answer

The representative must have a reasonable basis to believe the recommended security or strategy is suitable for at least some investors, based on their own due diligence.

Question 3

What does 'quantitative suitability' address under FINRA Rule 2111?

Accepted Answer

It prohibits excessive trading (churning) in a customer's account, requiring that the number and frequency of recommended transactions are not excessive given the customer's profile.

Question 4

Which customer factor is NOT typically included in a suitability analysis under FINRA Rule 2111?

Accepted Answer

The customer's political affiliation is not a required suitability factor.

Question 5

Under FINRA Rule 2111, what is the suitability obligation when a customer provides only limited information?

Accepted Answer

The registered representative must use reasonable diligence to obtain the customer's profile information; recommendations should be based on what is known and should be limited if the profile is incomplete.

Series 7: Suitability & Regulations

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