Quick Answer
A solicited order is one the representative recommends; an unsolicited order is initiated entirely by the customer. Solicited retail recommendations trigger Regulation Best Interest, which incorporates and strengthens suitability principles. The FINRA suitability rule does not separately apply to recommendations covered by Reg BI. Every order ticket must be marked accurately, and mismarking it is a violation.
Understanding who initiated a trade matters because it determines the level of regulatory responsibility the firm carries. This distinction directly affects suitability and best interest obligations.
Definitions
- A solicited order is one where the registered representative recommends the trade to the customer
- An unsolicited order is initiated entirely by the customer without a recommendation from the rep
Exam Tip: Gotchas
The trigger is who made the recommendation, not who placed the order. A rep who recommends buying XYZ creates a solicited order even if the customer hangs up, thinks it over, and calls back the next day to place the order themselves.
Why It Matters: Regulatory Obligations
| Aspect | Solicited Order | Unsolicited Order |
|---|---|---|
| Who initiated? | The rep recommended it | The customer requested it |
| Reg BI (retail customers) | Applies: the firm must act in the customer's best interest | Not triggered (no recommendation was made) |
| FINRA suitability rule | Applies to recommendations outside Reg BI’s scope | Not triggered (no recommendation was made) |
| Firm responsibility | Firm is directly responsible for the recommendation | Firm has less liability for the trade |
- For a retail customer, a solicited recommendation triggers Regulation Best Interest (Reg BI), the SEC's standard requiring the firm to act in the customer's best interest
- For retail recommendations, Reg BI incorporates and strengthens suitability principles. FINRA’s suitability rule does not separately apply to recommendations covered by Reg BI; it continues to govern recommendations outside Reg BI’s scope.
Think of it this way: The chain of responsibility flows naturally. A rep recommends a trade, so the order is solicited, which triggers the firm's recommendation obligation (Reg BI for a retail customer). The order ticket is marked accordingly, and the firm bears responsibility for the recommendation.
Exam Tip: Gotchas
For a retail customer, a solicited recommendation triggers Reg BI, which includes suitability principles. This does not mean both rules separately apply: the FINRA suitability rule excludes recommendations covered by Reg BI. Unsolicited orders trigger neither, because no recommendation was made.
Order Ticket Marking
Every order ticket must be marked as either solicited or unsolicited under the SEC's order-ticket recordkeeping rules:
- The marking must accurately reflect who initiated the trade
- Mismarking an order ticket is a serious violation
- Reps sometimes improperly mark solicited trades as "unsolicited" to avoid suitability scrutiny; this is a regulatory violation
Exam Tip: Gotchas
Mismarking an order ticket is itself a violation, independent of whether the trade is suitable. The marking requirement comes from the SEC's order-ticket recordkeeping rules.
The Limits of "Unsolicited"
Even unsolicited orders have boundaries:
- A rep cannot hide behind "the customer asked for it" if the activity is obviously inappropriate
- Unsolicited orders must still be accepted in good faith
- If a pattern of unsolicited trades appears clearly unsuitable or indicative of manipulation, the rep has an obligation to flag it
Exam Tip: Gotchas
Even unsolicited orders must be flagged if they are clearly unsuitable or indicative of manipulation. A rep cannot simply claim the customer initiated the trade to avoid responsibility for obviously inappropriate activity.
What Should You Check on Exam Day?
- Can you explain why who made the recommendation, not who placed the order, decides solicited status?
- Do you know which regulation applies to a solicited recommendation for a retail customer?
- Can you distinguish suitability principles within Reg BI from the separate FINRA suitability rule?
- Do you know why mismarking an order ticket is a violation on its own?
- Can you explain why a rep must still flag an unsolicited trade that looks unsuitable?