FINRA questionnaire in the Due Diligence stage
The FINRA questionnaire is encapsulated in a KYC Type available in the Due Diligence stage. It has five item groups:
- FINRA applicability
- Reasonable basis and institutional customer
- Customer-specific suitability
- Quantitative suitability
- Know Your Customer
FINRA applicability’ merely indicates the reason why the FINRA questionnaire is displayed, i.e., because in the Global questionnaire it has been indicated that the security product having United States as booking jurisdiction has been sold or recommended by a US-registered broker dealer or its associated person.
‘Reasonable basis and institutional customer’ is the item group focusing on the first type of suitability (i.e., the reasonable-basis) and the exception from the obligation to satisfy the customer‐specific suitability for those classified as institutional customers.
The reasonable-basis suitability requires the financial advisor to perform diligence on the product or investment strategy in order to understand potential risks and advantages, so that it can be assessed whether the recommendation is suitable for some investors.
‘Customer-specific suitability’ is where the user enters the data delineating the investment profile of a particular customer, which includes – though it is not limited to – their financial situation, liquidity needs, as well as the customer’s investment objectives, experience, and time horizon.
The customer-specific suitability is the obligation for the financial advisor that a recommendation of a security or an investment strategy is suitable for a certain customer based on their investment profile as previously determined.
‘Quantitative suitability’ is the item group about the quantitative suitability obligation. Such obligation requires that when recommending a transaction or a series thereof, financial advisors evaluate whether it is suitable not in isolation but viewed as a whole in relation to the investment profile of the customer.
‘Know Your Customer’ is the item group where the user can register whether any special handling instructions for the account have been provided by the customer.
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