Suitability analysis asks three questions. Reasonable-basis: is the product or strategy suitable for anyone, having been understood by the firm? Customer-specific: does it fit this investor's age, income, holdings, experience, time horizon, liquidity needs and risk tolerance? Quantitative: is the series of recommendations excessive given that profile?
The quantitative limb is the one that produces churning cases, measured by turnover rate and cost-to-equity ratio. The customer-specific limb is where options approval levels and concentration in a single name get tested.
For retail customers regulation-best-interest now sets a higher bar, but suitability still governs institutional customers and remains the framework arbitrators reason with in finra-arbitration.
Related: regulation-best-interest, churning, finra-arbitration, fiduciary-duty, options-account-approval