FINRA Series 7Opens Accounts and Evaluates Customer ProfileEasy
When completing a new account form for an individual customer under FINRA's suitability and Reg BI requirements, which of the following is required customer-specific information that must be obtained?
- AThe customer's favorite mutual fund company
- BThe customer's political party affiliation
- CThe customer's employer's stock ticker symbol
- DThe customer's investment objectives, time horizon, liquidity needs, and risk tolerance
Show answer & explanationAnswer & explanation
Correct answer: D. The customer's investment objectives, time horizon, liquidity needs, and risk tolerance
Under FINRA Rule 2111 and Reg BI, firms must gather essential facts about the customer's investment profile, including investment objectives, time horizon, liquidity needs, risk tolerance, financial situation, and other relevant factors, to support suitable recommendations.
Why the other options are wrong
- A. Favorite fund company is not a required KYC data point.
- B. Political affiliation is irrelevant and not collected.
- C. Employer stock ticker is not part of the standard investment profile.
Customer Investment Profile
The set of KYC data points (objectives, time horizon, liquidity needs, risk tolerance, financial situation) required to support suitable recommendations.
- Required under FINRA Rule 2111 and Reg BI
- Must be updated periodically
- Basis for suitability determinations
Memory trick: Know your customer's Goals, Time, Liquidity, and Tolerance—GTLT.