What suitability requirement must institutional investors comply with?

Institutional investors are primarily subject to product suitability requirements. Unlike retail investors, whose suitability is often assessed on an individual basis reflecting their personal financial situation, investment goals, and risk tolerance, institutional investors are typically expected to analyze the specific characteristics and risks associated with investment products.

Product suitability ensures that the financial products offered meet the broader investment objectives and risk profiles of the institution as a whole, rather than focusing on individual characteristics. Institutions are presumed to have greater expertise and resources to evaluate the appropriateness of various investment options. This aligns the investment strategies with the overall goals of the institutional investor, such as pension funds, insurance companies, or mutual funds, while also allowing them to make informed decisions about the types of products that fit within their established investment parameters.

This focus on product suitability is crucial for maintaining alignment with the institutions' investment objectives and compliance with regulatory requirements, while allowing for a different standard of assessment compared to individual investors.