46. Operating variables includes
technology used, product
suitability etc.
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Answers
Answer:
Definitions
“Investment product” is defined for the purposes of this report as an asset acquired for
the purpose of earning interest, dividends, or appreciation including traditional products
such as stocks, bonds, mutual funds, annuities, and life insurance policies and more
complex instruments such as options, hedge funds, variable insurance products, direct
participation programs/limited partnerships and real estate investment trusts ("REITs").
Investment products as referenced in this document do not include standard deposit
accounts but include deposit accounts having an investment component, such as
structured deposits. The "sale of investment products" also refers to investment services
related to investment products. Credit products sold by banks in retail settings were not
part of this review.
Suitability requirements are defined here as any requirement that a financial firm, when
advising a retail client to purchase a particular financial instrument, make a determination
of whether that investment is “suitable” or appropriate for that particular client. Suitability or
appropriateness are given a broad meaning: "the degree to which the product or service
offered by the intermediary matches the retail client's financial situation, investment
objectives, level of risk tolerance, financial need, knowledge and experience." The term
“disclosure” refers to any requirement that the firm disclose information to the retail client
that could be material to the investment decision. In a sense, disclosure is intended to
assist the retail client in making his/her decision, but is quite distinct from the requirement
on a firm to make a determination of whether a particular product is suitable for the client.
The term “mis-selling” generally refers to the situation where the firm sells a product to a
client that is not suitable for that client, whether or not a recommendation is made.
Explanation: