Suitability Rule
FINRA Rule 2111 -- the older standard requiring brokers to have a reasonable basis to believe a recommendation is suitable for the customer's investment profile (objectives, risk tolerance, time horizon, liquidity needs, etc.). Has three components: reasonable-basis suitability (the product itself is appropriate for SOMEONE), customer-specific suitability (it is appropriate for THIS customer), and quantitative suitability (a series of trades is not excessive given the profile). For broker-dealers, partly superseded by the stricter Reg BI best-interest standard for retail recommendations made after June 2020, but Rule 2111 still applies and is the baseline you learn first.
Lessons that use this term
Related terms
Anti-Money-Laundering (AML) · Currency Transaction Report (CTR) · Investment Policy Statement (IPS) · Know Your Client (KYC) · Onboarding Workflow · Politically Exposed Person (PEP)
Open this term in the app → — no account needed; browse the full glossary while you research.