RegulationsQuestion 53 of 110
A customer is nervous about market volatility and the representative offers to personally reimburse any losses in the first year. This offer is:
a.Acceptable if the representative documents it in the client file
b.Acceptable if the branch manager approves it in writing
c.Acceptable only for accounts under $25,000
d.Prohibited, because a registered person may not guarantee a customer against loss
Explanation
Guaranteeing a customer against loss is flatly prohibited; it misrepresents the risk of the investment and creates an obligation the firm has not sanctioned. No amount of documentation, supervisory approval, or account size makes the promise permissible. Sharing in losses is permitted only under narrow joint-account rules with written firm and customer approval and proportionate capital contribution.
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