Registered securities professionals and broker-dealers have an obligation to only recommend securities to an investor that are appropriate and in line with that specific investor’s financial profile. Specifically, FINRA Rule 2111 requires that a firm or associated person have a reasonable basis to believe a recommended transaction or investment strategy involving a security or securities is suitable for the customer.

The determination of what is suitable for a specific investor is based on the information the registered individual and/or broker-dealer obtained from the investor through reasonable diligence. Broker-dealers are obligated to make a reasonable inquiry to determine the investor’s: age, income, net-worth, investment objectives and risk tolerance.