ch. 4

Question 1

Professional conduct by IAs

Answer 1

Fiduciary duty to provide only suitable advice to clients, maintain client’s accounts up to date as their needs change.

Question 2

Uniform Prudent Investors Act of 1994

Answer 2

set basic standards for all professionals acting as a fiduciary.

Question 3

Fair dealings with clients

Answer 3

all IAs are required to act in good faith

Question 4

churning

Answer 4

making transactions that are excessive in size or frequency, to make higher commissions.

Question 5

reverse churning

Answer 5

placing inactive accounts into fee-based programs where fees are automatic.

Question 6

customer complaints

Answer 6

written complaints from a customer must be reported promptly to the principal, maintain separate file including what they did to resolve the complaint

Question 7

periodic payment plans

Answer 7

must be disclosed:
profit is not guaranteed
investors are not protected from a loss
continuous investments, regardless of market conditions

Question 8

disclosure of client information

Answer 8

may not disclose any information regarding clients to a third party without expressed consent.

Question 9

borrowing and lending $

Answer 9

loans may be made if the agent is a bank or lending institution, where there is a personal or outside business relationship and that relationship is the basis for the loan, or between two agents in the same firm

Question 10

developing client profile

Answer 10

recommendations must be suitable based on the client’s investment objective and client profile.