RIA Client Suitability & Fiduciary Duty 3

Question 1

An adviser who receives a referral fee from a third party for recommending a client must:

Accepted Answer

Disclose the fee arrangement to the referred client

Answer

Keep the fee confidential to avoid client concern

Answer

Return the fee to the referring party

Answer

Report the fee only on tax returns

Question 2

Which of the following represents the correct application of the duty of care?

Accepted Answer

Tailoring investment advice based on each client's unique circumstances and goals

Answer

Recommending the same portfolio to all clients with similar ages

Answer

Maximizing returns without regard to risk

Answer

Investing client funds in the adviser's best-performing strategy

Question 3

When an investment adviser discovers an error in a client's account, the fiduciary duty requires:

Accepted Answer

Promptly correcting the error and notifying the client

Answer

Reporting the error only if it exceeds $10,000

Answer

Waiting until the end of the quarter to correct errors

Answer

Correcting only errors caused by client instructions

Question 4

The concept of 'informed consent' in the fiduciary context means:

Accepted Answer

Client understands and agrees after receiving full disclosure of all material facts and conflicts

Answer

Client signs any document the adviser provides

Answer

Client approves of investment returns

Answer

Client has a law degree

Question 5

An adviser recommends liquidating a client's portfolio to reinvest in the adviser's new fund primarily because the adviser earns higher fees. This is an example of:

Accepted Answer

Breach of fiduciary duty

Answer

Sound portfolio management

Answer

Proper disclosure practice

Answer

Acceptable conflict management

Question 6

A client instructs an adviser to concentrate their entire portfolio in a single stock. The adviser's obligation is to:

Accepted Answer

Inform the client of the risks while documenting the client's instruction, then follow it if the client insists

Answer

Execute the instruction without comment

Answer

Refuse and invest in a diversified portfolio instead

Answer

Report the client to regulators