Lucky the Banker mascotLTB
← Series 7: Opens & Maintains Customer Accounts
Series 7 practice questionmediumCustomer Profiles — Reasonable-Basis Suitability

Reasonable-basis suitability requires that a registered representative:

  1. AEnsure that a recommendation is suitable for every customer
  2. BOnly recommend securities that have been approved by FINRA
  3. CGuarantee that the customer will earn a profit
  4. DPerform due diligence to understand the nature and risks of a security before recommending it to any customer✓ Correct answer
Explanation

Why D — Perform due diligence to understand the nature and risks of a security before recommending it to any customer

Reasonable-basis suitability, the first of three obligations under FINRA Rule 2111, requires that the representative have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. This means performing adequate due diligence on the product's risks, features, and costs before recommending it.

Turn it into reps

Reading one answer is not the same as being ready

Lucky the Banker is a free practice app with 758+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.

Practice Series 7 freeSeries 7 exam guide

Spot an error in this question or explanation? Tell us — we fix these fast.

Related Opens & Maintains Customer Accounts questions