Appropriateness Test
Brokers & RegulationThe onboarding assessment a regulated broker uses to judge whether leveraged products such as CFDs suit a client's knowledge and experience.
An appropriateness test is the assessment a regulated broker asks a prospective client to complete before opening a leveraged trading account. The questionnaire covers trading experience, knowledge of the products, understanding of leverage and risk, and basic financial circumstances. Its purpose is to judge whether complex leveraged instruments such as CFDs are appropriate for that client — not to predict whether any particular trade will be profitable.
Under regimes such as MiFID II, firms must carry out this suitability-style check, warn applicants who appear not to understand the risks, and in some cases decline to onboard them. The test sits alongside client categorisation, since professional clients are presumed to have knowledge that retail clients are required to demonstrate.