How are execution-only clients categorized under regulatory standards?

Execution-only clients are categorized under regulatory standards as individuals who make their own investment decisions without the benefit of personalized advice or guidance from financial professionals. This designation implies that they take full responsibility for their choices and are more self-directed in their trading activities. As a result, they are not afforded the same level of protections that might be available to clients who receive advisory services.

Regulatory frameworks often provide different levels of protection to various types of clients, with retail clients typically receiving more safeguards, such as suitability requirements for investment recommendations. Execution-only clients, however, operate under a more streamlined regulatory approach, as they do not engage in advisory relationships. This means that while they may have the freedom to execute trades as they see fit, they also bear the risk associated with the decisions they make without professional input. Thus, they do not benefit from the same protections designed to shield clients who might be less knowledgeable about investment products and risks.