CFC Ethics and Professional Standards 2

Question 1

Under the Investment Advisers Act of 1940, investment advisers registered with the SEC must provide clients with:

Accepted Answer

Form ADV Part 2 (the adviser brochure) disclosing fees, services, and conflicts

Answer

SEC-registered investment advisers must deliver Form ADV Part 2 to clients, disclosing material information about the adviser's business, fees, conflicts of interest, and disciplinary history.

Question 2

The 'suitability' standard historically applied to broker-dealers differs from the 'fiduciary' standard in that suitability:

Accepted Answer

Requires only that recommendations be appropriate for the client at the time, not necessarily the best option

Answer

Under the traditional suitability standard, a broker needs only to show a recommendation was appropriate given client circumstances, while fiduciary duty demands the best available option for the client.

Question 3

When a financial planner learns that a client is engaged in financial elder abuse against a family member, the planner's primary ethical obligation is to:

Accepted Answer

Report it to appropriate authorities and consider withdrawing from the engagement

Answer

Facilitating or concealing elder financial abuse violates ethical and potentially legal obligations; planners should report suspected abuse to adult protective services or law enforcement.

Question 4

Regulation Best Interest (Reg BI) requires broker-dealers, when making a recommendation, to act in the:

Accepted Answer

Best interest of the retail customer, placing their interest ahead of the firm's

Answer

SEC Reg BI requires broker-dealers to act in the retail customer's best interest at the time of a recommendation and not place their own financial interests ahead of the client's.

Question 5

A financial professional who uses client funds for personal investments without authorization is guilty of:

Accepted Answer

Misappropriation (embezzlement)

Answer

Misappropriation of client funds for personal use constitutes embezzlement — a serious ethical violation and criminal offense that permanently damages professional standing.

CFC - Certified Financial Consultant Practice Test

CFC - Certified Financial Consultant Practice Test

CFC Ethics and Professional Standards 2