A 52-year-old customer meets with a Series-6 representative to discuss retirement planning. The customer has $300,000 in taxable savings, earns $120,000 annually, is married, and has expressed a long-term growth objective. During the fact-finding meeting, the representative learns the customer has never invested in securities before and has made no contributions to any retirement accounts. To ensure a recommendation for mutual funds or variable annuities meets suitability standards, which of the following customer information elements are essential for the representative to obtain and document?
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Correct Answer:
A
FINRA Rule 2111 (Suitability) and Rule 2111.05 (Components of Suitability Obligations) require a representative to obtain reasonable basis knowledge and customer-specific information before making a recommendation. Essential elements include the customer's financial situation (income, assets, liabilities), investment objectives, time horizon, risk tolerance, tax status, and investment experience. This allows the representative to assess whether a product aligns with the customer's profile. Option B is incomplete because suitability requires far more than just income and assets—it requires a holistic understanding of the customer's needs and profile. Option C is incorrect because the rule does not prohibit recommending variable products to inexperienced investors; rather, the recommendation must be suitable based on documented facts. Option D mischaracterizes the rule; FINRA Rule 2111 does not require minimum holding periods or customer pre-commitment agreements in account documentation, though time horizon is certainly a relevant factor in the suitability analysis.
