Series 63 practice questionmediumSuitability and compensation conflicts
A junior banker recommends a commission-based investment product that pays a higher commission than alternatives. Under the USA, which factor is MOST relevant in determining whether the recommendation is a violation?
- AWhether the product is on a pre-approved list
- BThe suitability of the recommendation for the client✓ Correct answer
- CThe client’s net worth
- DWhether the client has used other products from the firm
Explanation
Why B — The suitability of the recommendation for the client
Suitability is paramount (Section 404). Compensation is less relevant if the recommendation is suitable. A, C, and D may be relevant to other aspects of compliance but not core to compensation conflicts.
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