Internal Control Questionnaires and Verification Procedures

Suitability

  1. Has a bank officer been assigned responsibility for implementing and monitoring the suitability system?

  2. Are systems in place to ensure that any salespeople involved in bank-related sales obtain sufficient information from customers to enable them to make a judgment about the suitability of recommendations for particular customers?

    1. Financial and tax status?

    2. Investment objectives?

    3. Other information such as date of birth, employment, net worth (net of residential real estate), income, current investments, or risk tolerance?

  3. Are customer responses to suitability inquiries documented on a standard form or any other method that permits ready review?

  4. Is there a tracking system designed to monitor and obtain missing suitability information?

  5. Are new accounts reviewed and formally accepted by a manager before the first transfer is finalized?

  6. Does the new account acceptance process include a review of the suitability inquiry and customer responses?

  7. Does a designated manager approve each sale in writing?

  8. Are breakpoints considered in both the initial recommendation and in the review of the suitability of those recommendations?

  9. Is suitability information for active accounts updated periodically?

  10. If the bank uses software programs to assist salespersons in making suitability judgments, does the program:

    1. Weight bank proprietary products and bank deposits similarly to other products?

    2. Consider breakpoints?

  11. If a software program is not used, has management identified which products meet certain investment objectives, or has management generally categorized products as suitable for either unsophisticated, sophisticated, or risk-averse customers?

  12. Does the bank use suitability guidelines that would limit certain transactions with first time or risk-averse investors, or would require a higher level of approval?

  13. Is a bank officer who is independent of the sales force assigned responsibility for reviewing complaints and their resolution?

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