Appropriateness
Appropriateness Assessment
Definition
The assessment firms must conduct for non-advised services involving complex financial instruments, to determine whether the client has the necessary knowledge and experience to understand the risks. Unlike suitability, appropriateness does not require assessment of the client's financial situation or investment objectives.
Regulatory Context
Under MiFID II, if a firm determines a product is not appropriate for a client, it must issue a warning but is not prohibited from proceeding if the client insists. Execution-only services for non-complex instruments are exempt from the appropriateness requirement.