Exercise
Answer TRUE or FALSE
1. _____ Diversification of investments within a portfolio is a key component of the prudent investor standard because this strategy tends to reduce potential risk.
2. _____ Under the suitability rule, securities professionals should always try to remove all potential investment risks for a client.
3. _____ As long as an agent discusses a client’s investment needs, wants, and expectations in full detail before engaging in any trades, he has lived up to his suitability requirement.
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