What should happen if a product is deemed not appropriate for a retail client?

• A. Do not recommend it; consider simpler or different products or provide clear warnings and options
• B. Proceed with the recommendation but reduce the fee
• C. Recommend it only to accredited investors
• D. Provide a generic warning without details

Answer: (A)

The main idea here is that what you recommend must match a retail client’s needs, knowledge, and risk tolerance. If a product is not appropriate, you should not push it. Instead, you look for simpler or different products that fit the client and you provide clear, tailored warnings about why the original product isn’t suitable and what options the client has.

This is best because it protects the client from taking on risks that exceed their capacity or understanding, and it supports informed decision-making by offering alternatives and specific disclosures about what makes the product unsuitable. It also aligns with responsible disclosure and documentation of why a recommendation isn’t appropriate.

The other approaches don’t meet that duty: proceeding with a recommendation while cutting fees doesn’t address suitability, and could still mislead or disadvantage the client. Limiting the recommendation to accredited investors ignores the client’s retail status. Providing only a generic warning lacks the detail and context the client needs to make an informed choice.