Exercise
Answer TRUE or FALSE
1. _____ It is not possible for churning to occur in a discretionary account.
2. _____ Agents generally cannot borrow money from or loan money to customers.
3. _____ For a margin account with a broker-dealer, a written agreement must be in place before any trades are made.
4. _____ An investment adviser would be allowed to enter into a performance-based arrangement if the client had a net worth of $2.5 million, which includes a primary residence valued at $600,000.
5. _____ An investment adviser representative can only reveal confidential client information with the client’s consent.
Answers
1. False. Churning, or excessive trading, can occur in both discretionary and non-discretionary accounts.
2. True. Although they may borrow money from lending institutions, agents must not borrow money from or lend m