Series 7: 14.3.3.2. Quantitative Suitability Of Discretionary Trading

Taken from our Series 7 Online Guide

14.3.3.2. Quantitative Suitability of Discretionary Trading

As with any other customer account, discretionary trades must be suitable to the customer’s financial abilities, tax status, and investment objectives. FINRA’s rules about suitability explicitly state that suitability has a “quantitative” component. That is to say, suitability applies not only to the type of trading but the amount of trading. A broker-dealer who has control over a customer account (whether formally, as in the case of a discretionary account, or informally) must have a reasonable basis to believe that the trading activity in the account is not excessive. Excessive buying and selling in a customer’s account chiefly to generate commissions that benefit the broker i

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