Unsuitable Investments

In making an investment recommendation to a client, a broker must make recommendations that are consistent with the customer's risk tolerance, needs and investment objectives. A broker has a duty to know his client and only recommend investments and trading strategies that are suitable for that client. An investment may be unsuitable if a customer does not have the financial ability to incur the risk associated with a particular investment, or if the investment was not in line with the investor's financial needs; or if the customer did not know or understand risks associated with certain investments.

A broker has a duty to understand the risk tolerance of an investor, the tax considerations for the client, the client's prior experiences and appetite for risk, and the level of return desired. It is the duty of a broker to make recommendations that are appropriate and suitable given his client's circumstances. If a broker breaches those duties and makes unsuitable recommendations for a client, the broker may be liable to that client.

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