SIE (Securities Industry Essentials) Practice Exam

Which suitability requirement is demonstrated when an investment manager ensures an investment aligns with the customer's objectives and supports their portfolio?

1. Customer-specific obligation

2. Reasonable basis obligation

3. Quantitative analysis

4. Know your customer obligation

The correct answer is: Customer-specific obligation

The choice of customer-specific obligation is correct because it pertains to the responsibility of an investment manager to ensure that an investment aligns with the customer's objectives and supports their portfolio. This includes understanding the customer's risk profile, investment goals, and financial situation to make appropriate investment recommendations. Option B, reasonable basis obligation, refers to the responsibility of an investment manager to conduct appropriate research and due diligence before making investment recommendations to clients. While this is an important requirement, it is not directly related to ensuring an investment aligns with a customer's objectives. Option C, quantitative analysis, refers to the use of mathematical and statistical models to make investment decisions. While this may be a tool used by investment managers to analyze an investment's potential, it does not directly address the suitability requirement of aligning with a customer's objectives. Option D, know your customer obligation, refers to the requirement for investment managers to have a clear understanding of their customer's personal and financial information. While this is an important aspect of suitability, it does not specifically address the responsibility of aligning an investment with a customer's objectives and portfolio.