Introduction

Welcome to Customer Investment Profiles and Suitability, the unit that connects everything you know about gathering customer information to the regulatory framework that governs every recommendation you make.

Exam Weight: Part of 9% (~11 questions across Chapter 2)

Video Resources

Live 1-on-1 tutoring with Dean Tinney ↗


Live 1-on-1 tutoring with Ken Finnen ↗

What You'll Learn

In this unit, you'll cover:

  • Essential Facts About Customers: The foundation of the know-your-customer obligation under FINRA Rule 2090
  • Financial Factors in the Investment Profile: Income, net worth, tax status, and the full range of data points that shape suitability
  • Investment Objectives: The four primary objectives (preservation, income, growth, speculation) and how to spot inconsistencies
  • Suitability Obligations Under FINRA Rule 2111: The three core obligations: reasonable-basis, customer-specific, and quantitative suitability
  • Regulation Best Interest (Reg BI): The SEC's higher standard for retail customers and its four component obligations
  • Investment Strategies and Hold Recommendations: How broadly "recommendation" is defined, including explicit hold recommendations
  • Accredited Investor Verification: Income tests, net worth tests, and the distinction between accreditation and sophistication
  • Investment Analysis Tools (Rule 2214): When hypothetical projections are permitted and the required disclosures
  • Municipal Securities Suitability (Municipal Securities Rulemaking Board (MSRB) Rule G-19): The parallel suitability framework for municipal bond recommendations

Why This Matters

Suitability is the bridge between knowing your customer and making appropriate recommendations. Every recommendation a registered representative makes (whether to buy, sell, or hold) must satisfy specific regulatory obligations. The Series 7 exam tests your ability to distinguish between the three suitability obligations, identify when Reg BI applies versus Rule 2111, and recognize red flags when stated objectives conflict with a customer's actual financial profile. Getting this wrong on the exam means getting it wrong with real clients.

Let's start with the essential facts every representative must gather before making any recommendation.