Which statement is correct regarding suitability and fiduciary standards?

The correct answer provides clarity on the distinction between suitability and fiduciary standards in a financial context. Suitability standards require financial professionals to recommend investments that are appropriate for a client's financial situation and objectives. Disputes arising from suitability violations are typically resolved through arbitration, as many financial services agreements include arbitration clauses.

On the other hand, fiduciary standards impose a higher duty, where financial advisors must act in the best interests of their clients, prioritizing their clients' needs above their own. This higher standard can lead to disputes that are more complex and often resolved in court, especially because fiduciary duty breaches can involve allegations of negligence or misconduct.

This differentiation is crucial for understanding that while both standards are important in guiding financial advisors' behavior, they have different avenues for dispute resolution that reflect the severity and nature of their responsibilities. As a result, only suitability disputes tend to be resolved in arbitration, while fiduciary disputes are more likely to go to court due to their more serious implications.