Suitability Requirements pertain to which principle?

Suitability Requirements pertain to which principle?

• A. A requirement to provide the prospectus
• B. NASD principle requiring the agent to assess the prospect's needs, financial circumstances, objectives and investment attitudes before consummating the sale
• C. A requirement to ensure the policy is tax-qualified
• D. A requirement to file all sales with NASD

Answer: (B)

Suitability Requirements focus on making sure an investment is appropriate for the client. The key idea is that the agent must gather information about a prospect’s needs, financial situation, investment objectives, and risk tolerance, and use that to determine whether the proposed policy fits before the sale is completed. This is the NASD principle that requires assessing these factors prior to consummating the transaction. Other listed concepts aren’t about matching a product to a client: providing the prospectus is a disclosure obligation, tax-qualified status concerns tax treatment, and filing sales with NASD is unrelated to client suitability.

Suitability Requirements focus on making sure an investment is appropriate for the client. The key idea is that the agent must gather information about a prospect’s needs, financial situation, investment objectives, and risk tolerance, and use that to determine whether the proposed policy fits before the sale is completed. This is the NASD principle that requires assessing these factors prior to consummating the transaction. Other listed concepts aren’t about matching a product to a client: providing the prospectus is a disclosure obligation, tax-qualified status concerns tax treatment, and filing sales with NASD is unrelated to client suitability.