Know Your Customer and Suitability
Chapters in this video
- 0:00 The office cast and why KYC and suitability matter
- 1:17 KYC as fact-gathering: essential facts and authority
- 1:52 KYC versus suitability: the two-step framework
- 2:15 KYC maintenance violations without any bad trade
- 3:28 The three stacked suitability obligations
- 4:00 Reasonable-basis suitability and the product-shelf trap
- 4:25 Quantitative suitability: control requirement and churning metrics
- 6:35 Institutional customers and the $50 million exemption
- 7:48 Rapid-fire exam recap
What this video covers
- Why know your customer (KYC) is purely fact-gathering and does not require any unsuitable trade to be violated
- How KYC covers account maintenance, not just account opening, and what failing to update records means for the firm
- The two-step framework: KYC gathers the profile, then suitability applies that profile to evaluate recommendations
- The three stacked suitability obligations: reasonable-basis, customer-specific, and quantitative
- Why reasonable-basis suitability can be violated before any customer is even pitched
- What actual or de facto control means for quantitative suitability, and the turnover rate and cost-equity ratio red flags
- How the institutional customer exemption works, what $50 million triggers, and which suitability layers it does and does not waive
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete Series 24 course also includes adaptive practice questions and spaced-repetition flashcards, free through the end of 2026.