Chapter 9 Practice Questions
- 1. A fiduciary is best defined as:
- A. Someone who works for someone else.
- B. Someone who is expected to make a profit for someone else, to the best of their ability.
- C. Someone who gets paid to give advice to someone else.
- D. Someone who is placed in a position of trust and expected to act in the best interest of someone else.
- 2. All of the following would be considered clear conflicts of interest except:
- A. Recommending a security for purchase that is owned by the adviser’s other clients
- B. Recommending a security also owned by the adviser
- C. Recommending securities from an issuer that employs the adviser’s spouse
- D. Receiving a free Wall Street Journal subscription from a mutual fund company whose products you sell to your clients
- 3. Which of the following is not used to determine if a trade is excessive?
- A. Whether the transaction was a principal transaction or an agency transaction
- B. Number of shares bought or sold by the client
- C. Client’s investment objectives
- D. Commission generated
- 4. An IA, IAR, or agent can borrow money from her client as long as:
- A. There is a written agreement in place prior to the loan.
- B. The interest rate is fair to the client.
- C. The client is in the formal business of lending money and the loan is an official loan.
- D. It is not to buy securities.
- 5. Which of the following would constitute someone sharing inside information?
- A. A CEO talking to his barber about last year’s annual report for his company
- B. A securities professional sharing a stock tip with someone who is not a customer
- C. A CEO’s spouse telling his mother about an upcoming merger that will be announced the following week
- D. A stockholder telling a non-stockholder what was discussed in that year’s annual stockholders’ meeting
- 6. Which of the following clients may enter into a performance-based compensation arrangement w