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Series 7 Suitability and Reg BI

Suitability and Regulation Best Interest run through Functions 2 and 3: gathering the customer profile and making recommendations that fit it..

Updated 2026-09-23 · 3 sources · By the SeriesPrepKit team

Where it sits in the outline

Parent outline section: F3: Provides Investment Information, Makes Suitable Recommendations (73% of the exam). Suitability and Regulation Best Interest run through Functions 2 and 3: gathering the customer profile and making recommendations that fit it.

Key concepts

Reg BI. For recommendations to retail customers, broker-dealers must meet four obligations: disclosure, care, conflict of interest and compliance. Reg BI applies to recommendations of securities, strategies and account types.

FINRA Rule 2111. Three suitability obligations: reasonable-basis (the product is suitable for someone), customer-specific (it is suitable for this customer) and quantitative (the frequency of trading is not excessive). For retail customers, Reg BI’s care obligation now covers this ground.

Profile factors. Age, other investments, financial situation and needs, tax status, objectives, experience, time horizon, liquidity needs and risk tolerance.

Classic fits. Income + safety: Treasuries, investment-grade bonds. Growth + long horizon: diversified equity. High bracket: munis in taxable accounts. Short horizon: avoid illiquid DPPs and non-traded REITs.

Worked example

Spotting the unsuitable recommendation

A 78-year-old widow needs income, has $300,000 in savings and needs access to cash for medical bills. Recommending a non-traded REIT with a multi-year lock-up for half her savings fails the customer-specific obligation (liquidity need, age and concentration). A laddered portfolio of Treasuries and investment-grade bonds fits her profile.

Common traps

  • Suitability is about the customer’s interest, not the product’s past performance.
  • Excessive trading can breach the quantitative obligation even if each trade looks reasonable alone.

Practice questions on this topic

Series 7 practice questions: Suitability

Under Regulation Best Interest's care obligation, a broker-dealer must have a reasonable basis to believe that a series of recommended transactions is not excessive. Which statement about this requirement is TRUE?

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Frequently asked questions

How much of the Series 7 is suitability and reg bi?

Parent outline section: F3: Provides Investment Information, Makes Suitable Recommendations (73% of the exam). Suitability and Regulation Best Interest run through Functions 2 and 3: gathering the customer profile and making recommendations that fit it.

Sources

  1. FINRA - Series 7 Content Outline (2025) (accessed 2026-09-23)
  2. FINRA Rule 2111 - Suitability (accessed 2026-09-23)
  3. SEC - Regulation Best Interest (accessed 2026-09-23)
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