What Does Suitability and Unsuitability Mean in a Securities Arbitration Case?
Video Summary: Unsuitability can be about a specific transaction, but generally, the concept is applied to a portfolio's composition and/or strategy. Unsuitability can also be applied to a product.
Suitability is a concept that's applied to investors and financial advisors. All financial advisors who are stockbrokers must make suitable recommendations. Suitability is determined by looking at the account, the portfolio as a whole; there is investment strategies in place that a financial advisor will make recommendations for and those have to be appropriate for the investor.
If the recommendations are inappropriate, such a recommendation would be deemed unsuitable.