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 for an investment adviser 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. The money from the loan is not used to buy securities.
5. Which of the following would constitute someone sharing inside information?
A. A CEO talking to his barber about his company’s annual report from last year
B. A securities professional sharing a stock tip with someone who is not a customer
C. A CEO’s spouse telling his mother about a 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