Financial Advisor Financial Advisor Ethics and Compliance 4

Question 1

A client gifts a financial advisor tickets to a major sporting event worth $350. Under FINRA rules, what is the gift limit per person per year?

Accepted Answer

$100

Answer

FINRA Rule 3220 limits gifts to $100 per person per year to prevent conflicts of interest.

Question 2

Which of the following best describes a 'churning' violation?

Accepted Answer

Excessive trading in a client's account to generate commissions

Answer

Churning occurs when a broker excessively trades a client's account primarily to generate commissions rather than to benefit the client.

Question 3

Under SEC Regulation Best Interest (Reg BI), broker-dealers must act in the 'best interest' of retail customers primarily at what point?

Accepted Answer

At the time the recommendation is made

Answer

Reg BI requires broker-dealers to act in the retail customer's best interest at the time a recommendation is made.

Question 4

A financial advisor learns that a publicly traded company is about to announce a major acquisition through a conversation with a corporate insider. Trading on this information would violate:

Accepted Answer

Insider trading laws under the Securities Exchange Act of 1934

Answer

Trading on material non-public information obtained from a corporate insider violates insider trading provisions of the Securities Exchange Act of 1934.

Question 5

When an investment adviser has a conflict of interest that could affect their advice, the primary ethical obligation is to:

Accepted Answer

Disclose the conflict to the client

Answer

Investment advisers must disclose material conflicts of interest to clients so they can make informed decisions.

Financial Advisor Practice Test

Financial Advisor Practice Test

Financial Advisor Financial Advisor Ethics and Compliance 4