General Securities Representative (Series 7) Practice Exam

When opening a new options account, who is responsible for assessing client suitability?

1. Registered representative

2. Compliance officer

3. Senior management

4. Client themselves

The correct answer is: Registered representative

The responsibility for assessing client suitability when opening a new options account primarily falls on the registered representative. This is because registered representatives are trained to understand the complexities associated with options trading and are tasked with determining whether a client has the appropriate financial background, investment objectives, and risk tolerance for engaging in such activities. In doing so, they must evaluate the client’s investment experience, knowledge of the options market, and overall financial situation to ensure that trading options aligns with the client’s goals. This suitability assessment is a critical part of the account opening process to protect clients from potential losses due to misunderstandings or overreaching investment strategies. While compliance officers and senior management play roles in maintaining regulatory standards and ensuring that the firm adheres to policies, the direct responsibility for ensuring that a specific client is suitable for options trading rests with the registered representative. Clients themselves may provide information about their financial status and investment experience but do not have the expertise to assess their own suitability comprehensively.