Suitability and risk disclosures

Establish customer classification, appropriateness and suitability assessments, product governance, disclosure timing, consent evidence, and risk-based trading controls.

Disclosure tells a customer what a product does. Suitability determines whether a recommendation or managed decision fits that customer. Appropriateness assesses whether a customer understands the risks of a product they selected themselves. Do not collapse these distinct controls into one checkbox.

Decision framework

Service	Minimum control	Outcome
Execution-only, plain product	Customer classification, product disclosure, knowledge/experience where required	allow, warn, or restrict
Complex or illiquid product	Appropriateness assessment and enhanced risk acknowledgement	allow, warn, or block under local rule
Personal recommendation	Full suitability assessment	documented recommendation or decline
Discretionary/managed service	Mandate, objectives, capacity for loss, portfolio suitability, ongoing review	approved strategy and limits

Warning is not always permission

Some regimes permit an execution-only warning; others require the firm to block an unsuitable or inappropriate transaction. Configure the rule per product, service, customer class, and jurisdiction.

Customer profile

Capture enough information to support the decision:

Retail, professional, eligible counterparty, or locally applicable customer class.
Investment objective, horizon, liquidity needs, and expected trade frequency.
Income, assets, liabilities, emergency reserves, and capacity to bear loss.
Knowledge and experience by instrument type, not a generic “experienced” flag.
Risk tolerance, concentration, currency exposure, and tax constraints.
Vulnerability, accessibility, language, and assisted-decision needs where applicable.

Reassess on material change and at a risk-based interval. A stale profile must not silently authorise a new recommendation.

Product governance

Product factor	Example control
Complexity	Product taxonomy and knowledge test
Liquidity	Holding-period warning and exit constraints
Volatility / loss	Capacity-for-loss and concentration limits
Currency	Local-price and USD-wallet FX disclosure
Valuation	Delayed-data warning and `asOf` presentation
Settlement	Execution versus custody settlement timeline
Counterparty / issuer	Credit, custody, and insolvency risk disclosure
Private market	Eligibility, transfer restrictions, valuation uncertainty, and long lock-up

Disclosure stack

Present information when it can affect the decision, not only in a footer after submission:

Before account opening: service scope, entities, custody model, conflicts, fees, complaints, and data use.
Before product access: product risks, target market, eligibility, liquidity, currency, and loss scenarios.
At quote: delayed timestamp, estimated price, FX, fees, expiry, and non-guaranteed execution.
Before order: side, quantity/cash value, instrument, venue, order type, time in force, total estimate, and acknowledgement.
After order: immutable receipt, status, cancellation rules, execution confirmation, settlement, and final charges.

The quote is valid for 60 seconds, but its underlying price observation may be delayed. Display both quoteExpiresAt and price asOf; they answer different questions.

Evidence and controls

Version every questionnaire, scoring rule, disclosure, translation, and product classification.
Record inputs, result, warnings, overrides, approver, timestamp, and customer acknowledgement.
Require reasoned approval for overrides and monitor override frequency by adviser/product.
Keep marketing balanced with risks; do not imply guaranteed liquidity, returns, or capital protection.
Test comprehension and accessibility on low-bandwidth mobile devices and supported languages.
Monitor concentrations, repeated warnings, vulnerable customers, and sales outside the target market.