Exercise
Answer true or false
- 1. _ Diversification should be considered as part of the prudent investor standard, as it tends to reduce potential risk.
- 2. _ Under the suitability rule, securities professionals should always try to remove any potential for client risk.
- 3. _ As long as an agent discusses in full detail a client’s investment needs, wants, and expectations before engaging in any trades, the suitability requirement has been met.
- 4. _ Until all relevant suitability information has been considered, a broker-dealer is prohibited from engaging in all securities transactions for a client.
Answers
- 1. True. Portfolio diversification, since it reduces overall risk, is considered to be an important aspect of the prudent investor standard.
- 2. False. Suitability involves m