Series 63 practice questionmediumChurning and Suitability
An agent engages in frequent buying and selling of securities in a client’s account, generating high commissions. Under the USA, what suitability violation might this be?
- AQuantitative suitability✓ Correct answer
- BReasonable basis suitability
- CCustomer-specific suitability
- DNo violation if trades are profitable
Explanation
Why A — Quantitative suitability
Quantitative suitability prohibits excessive trading (churning) for commissions (USA Section 402). Reasonable basis concerns the security’s general suitability; customer-specific is about product fit, and profitability doesn’t excuse the conduct.
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