Investment Planning | Lesson 1: Fundamentals Of Investmentd

Question 1

Which of the following statements is true regarding the Securities Investors Protection Act of 1970?

a) The act protects investors from losses arising from bad investment decisions.
b) The act requires a prospectus to accompany all new issues.
c) The act protects investors from negligence on the part of an investment adviser.
d) The act protects investors from losses arising from brokerage firm failures.

Answer 1

Answer: D
The Act protects investors from brokerage firm bankruptcies. The act does not protect against bad investment decisions or advisor negligence. The Securities Act of 1933 requires a prospectus that accompanies new issues.