Brokers are required to observe the high standards of commercial honor and just and equitable principles of trade when dealing with investors. When making investment recommendations, brokers are required to gather essential information so that they know everything about their customer, in order to make only those recommendations that are suitable and in keeping with the individual's investment objectives, tolerance for risk, financial needs and time horizon. Of particular interest is whether the investor is employed or retired, whether the investment funds are in retirement accounts or trusts, what are the tax implications and are there any health issues involved. Once the broker has gathered all of the essential information, he must have a "reasonable basis" for any recommendations that he makes. If a broker breaches any of these duties and makes unsuitable recommendations to the customer, he or she might be liable for losses sustained by their customer because of those investments.
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