Laws & RegulationsQuestion 110 of 110
Under the NASAA model rules on unethical business practices, which of the following is prohibited for an adviser or agent?
a.Explaining the risks of a recommended strategy
b.Charging a reasonable, disclosed advisory fee
c.Recommending securities consistent with the client's objectives
d.Guaranteeing a client against loss or churning the account to generate fees
Explanation
NASAA's model rules on unethical business practices prohibit conduct such as guaranteeing a client against loss, churning (excessive trading to generate commissions), and making unsuitable recommendations. These practices harm clients and undermine market integrity. Disclosing risks, charging reasonable disclosed fees, and making suitable recommendations are proper conduct, not violations.
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