Unsuitable transaction cases are similar to unsuitable recommendation cases. In both, the investment professional must have "reasonable grounds" to believe that the investment is suitable for the client in light of the client's overall circumstances and investment objectives; however, in an unsuitable recommendation case the investment professional makes a recommendation and the investor makes the investment decision.

In an unsuitable transaction case, the broker either has formal discretionary control over the account and makes the trade without consulting the investor, or the broker has practical ("de facto") control over the investor or the account, so that he is held responsible for the trades as if he had made them without the investor's approval.

Common characteristics of unsuitable transactions are:

• Risk. It is usually improper for a broker to invest a substantial portion of a client's net worth in risky investments that such investor cannot reasonably tolerate.
  
  
• Illiquidity. It is usually improper for a broker to invest a substantial portion of a client's assets in illiquid investments for which there is no ready market or that have substantial penalties or fees for early redemption.
  
  
• Concentration. It is usually improper for a broker to invest a substantial portion of a client's assets into a single or insufficiently small number of securities.
  
  
• Tax Insensitive Investments. In cases where an investor needs to minimize his or her taxes, it is improper for a broker to make certain investments, such as purchase certain actively traded mutual funds that generate large and unnecessary tax liabilities.
  
  
• Double tax exemptions. It is usually improper for a broker to invest client funds that are already free of income taxation on gains, such as money in an IRA, in tax-free bonds or other tax-free securities.