Question #45
Reading: Reading 42.5 Standards of Professional Conduct Guidance for Standards V
PDF File: Reading 42.5 Standards of Professional Conduct Guidance for Standards V.pdf
Page: 23
Status: Incorrect
Correct Answer: B
Your Answer: B
Part of Context Group: Q45-46
First in Group
Shared Context
Question
Which of the following statements regarding Alpha Co. is least accurate?
Answer Choices:
A. Sandro has breached a fiduciary duty to her client
B. The fair-dealing standard has not been violated
C. Both Wilson and Sandro have a reasonable basis for their recommendations
Explanation
The use of a comprehensive research report is reasonable basis for a buy or sell
recommendation. The fair-dealing standard has not been violated, as neither client was
put at a disadvantage by the advice, even though the analysts' advice was contradictory.
The fair-dealing standard requires the notification of clients who trade in opposition to the
firm's official recommendation, so the trade should not be executed until the client is told
about the firm's buy rating. While Sandro's advice differs from that of her colleague and is
based on a competitor's research, she did not necessarily breach a fiduciary duty, if the
investment made sense for the client. There are numerous investments that are
appropriate for certain types of clients and inappropriate for others.
(Module 42.8, LOS 42: V(A))