Question of the Week

All of the following are unethical behaviors prohibited under the Uniform Securities Act EXCEPT:

a) Deliberately failing to follow a client’s instructions
b) Executing a trade that the sales representative believes to be unsuitable at the client’s orders
c) Telling a client that the investment adviser is registered and therefore has been approved by the state Administrator
d) Failing to tell a client that making trades recommended by the investment adviser will subject them to a large tax liability


Answer:

The correct answer is b.

All registrants must follow the client’s instructions, including executing a trade that the registrant believes is not suitable. It would only be unethical if the registrant had recommended the inappropriate trade. Also, neither an investment adviser nor a sales representative may imply that registration by the Administrator means that they are “approved” by the Administrator.