Welcome to Customer Investment Profiles and Suitability: the rules that tell a Series 6 representative what to ask, who the answers are for, and which standard of care applies when a recommendation gets made.
Exam Weight: Part of 16% (8 questions across Chapter 2)
What You'll Learn
In this unit, you'll cover:
- The Customer Investment Profile: The financial and non-financial facts a registered representative (rep) must make reasonable efforts to gather, and why refusing to share information limits what the rep can recommend
- The Suitability Framework: The three-layer test (reasonable-basis, customer-specific, quantitative) and the investment-profile factors required by the FINRA suitability rule
- Hold Recommendations and Strategy Recommendations: Why a "stay in that fund" comment is itself a recommendation, and which educational safe harbors fall outside the suitability rule
- The Institutional-Customer Exemption: When a $50 million customer affirmatively exercising independent judgment waives customer-specific suitability
- Regulation Best Interest (Reg BI): The four obligations (Disclosure, Care, Conflict of Interest, Compliance) that apply to recommendations to retail customers
- Form CRS: The relationship summary, its page limits, the five required sections, and the delivery triggers for new and existing retail investors
- The Investment-Analysis-Tool Rule: The required written narrative disclosures and the 10-business-day filing and access obligations
- The MSRB Municipal-Suitability Rule: The municipal-securities suitability parallel that governs 529 plans, Local Government Investment Pools (LGIPs), and Achieving a Better Life Experience (ABLE) accounts
Why This Matters
The Series 6 exam tests whether you can tell:
- KYC vs. Suitability: the know-your-customer (KYC) rule always applies; the suitability rule only applies when a recommendation is made
- Three cumulative obligations: a recommendation must pass reasonable-basis, customer-specific, and quantitative suitability (not any one of them)
- Hold = recommendation: telling a customer "keep holding" is itself a recommendation subject to suitability
- Reg BI covers retail only: recommendations to institutional customers stay under the FINRA suitability rule
- Form CRS is broader than Reg BI: a prospect who has not received a recommendation is still a retail investor for Form CRS delivery
- Sales contests must be eliminated, not disclosed: the Conflict of Interest Obligation under Reg BI treats them as a category that disclosure cannot cure
Every fact protects the customer, supports the recommendation file, and documents your defense if a complaint is filed later.
Let's start with the information the rep must gather before any recommendation is made.