Prudent-Person Rule

DEFINITION of 'Prudent-Person Rule'

A legal maxim restricting the discretion in a client's account to investments that a prudent person seeking reasonable income and preservation of capital might buy for his or her own portfolio.

Also called the "prudent man rule".

BREAKING DOWN 'Prudent-Person Rule'

This rule is intended to protect investors using the services of an investment advisor from shady, risky, or otherwise poor investments, such as penny stocks.

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