Chapter 10 Practice Questions

1. 1. A fiduciary is best defined as:
2. A. Someone who works for someone else
3. B. Someone who is expected to make a profit for someone else, to the best of their ability
4. C. Someone who gets paid to give advice to someone else
5. D. Someone who is placed in a position of trust and expected to act in the best interest of someone else
6. 2. All of the following would be considered clear conflicts of interest except:
7. A. Recommending a security for purchase that is owned by the adviser’s other clients
8. B. Recommending a security also owned by the adviser
9. C. Recommending securities from an issuer that employs the adviser’s spouse
10. D. Receiving a free Wall Street Journal subscription from a mutual fund company whose products you sell to your clients
11. 3. Which of the following is not used to determine if a trade is excessive?
12. A. Price of the stock
13. B. Number of shares bought or sold by the client
14. C. Client’s investment objectives
15. D. Commission generated
16. 4. An investment adviser, IAR, or agent can borrow money from her client as long as:
17. A. There is a written agreement in place prior to the loan.
18. B. The interest rate is fair to the client.
19. C. The client is in the formal business of lending money and the loan is an official loan.
20. D. It is not to buy securities.
21. 5. Which of the following would constitute someone sharing inside information?
22. A. A CEO talking to his barber about last year’s annual report for his company
23. B. A securities professional sharing a stock tip with someone who is not a customer
24. C. A CEO’s spouse telling his mother about an upcoming merger that will be announced the following week
25. D. A stockholder telling a non-stockholder what was discussed in that year’s annual stockholders’ meeting
26. 6. Which of the following clients may enter into a performance-based compensation arrangement with an investment adviser?
27. I. Registered