The appropriateness of a particular security as an investment for a particular investor, taking into account the specific features of the security and the investor's financial capabilities and sophistication, tax status, investment objectives and other relevant considerations. A security that seems appropriate for the investor in light of these factors is said to be “suitable,” whereas one that does not seem appropriate may be “unsuitable.” Broker-dealers are required under SEC rules to make suitability determinations before recommending particular investments or investment strategies to customers.

A suitability violation occurs when an investment made by a broker is inconsistent with the investor's objectives, and the broker knows or should know the investment is inappropriate.

Last updated on May 14, 2009 by Jack Parsons