Question #1
Reading: Reading 42.3 Standards of Professional Conduct Guidance for Standards III
PDF File: Reading 42.3 Standards of Professional Conduct Guidance for Standards III.pdf
Page: 1
Status: Correct
Correct Answer: A
Question
An investment advisor goes straight from a research seminar to a meeting with a prospective new client with whom she has never been in contact. The advisor is very excited about the information she just received in the seminar and begins showing the prospect the new ideas her firm is coming up with. This is most likely a violation of:
Answer Choices:
A. Standard III(B), Fair Dealing
B. Standard III(C), Suitability
C. both of these
Explanation
It is a violation of Standard III(B) because the advisor should act first on behalf of existing
clients whose needs and characteristics she already knows. It is a violation of Standard
III(C) because she has never met the prospect and does not know if the new ideas are
appropriate for the prospect. Thus, "both of these" is the best response.
(Module 42.5, LOS 42: III(B))