FINRA Assessment and Evaluation 2

Question 1

A registered representative is assessing a client's risk tolerance for a new account. Which factor is LEAST relevant to this evaluation?

Accepted Answer

Current market index levels

Answer

Current market index levels are a market condition, not a client-specific factor relevant to individual risk tolerance assessment.

Question 2

Under FINRA Rule 2111, what does the 'quantitative suitability' obligation require of a broker?

Accepted Answer

Avoiding excessive trading in a customer's account

Answer

Quantitative suitability prohibits a broker who controls an account from making excessive trades that are unsuitable even if each individual trade might be suitable.

Question 3

When evaluating a customer's financial profile, which best describes 'liquidity needs'?

Accepted Answer

The ease with which the customer can convert investments to cash without loss

Answer

Liquidity needs refer to how readily a customer may need to access funds, affecting which investments are appropriate.

Question 4

A customer states she has a 'moderate' risk profile but her portfolio consists entirely of speculative penny stocks. What must a registered representative do?

Accepted Answer

Reassess suitability and discuss the inconsistency with the customer

Answer

A registered representative must identify and discuss discrepancies between stated risk tolerance and actual holdings to ensure suitability.

Question 5

In evaluating whether an annuity recommendation is suitable under FINRA guidance, which of the following must be specifically considered?

Accepted Answer

Whether the customer has other retirement assets outside the annuity

Answer

FINRA guidance on annuity suitability requires evaluating a customer's entire financial picture, including other retirement assets, to avoid over-concentration.

(FINRA) FINRA Exams Practice Test

(FINRA) FINRA Exams Practice Test

FINRA Assessment and Evaluation 2