Question

A registered representative tells the following to all of his customers: "I am aggressive in my approach; and frequently recommend that securities positions be changed during each day as market conditions fluctuate. While this approach can result in higher commission costs, it produces superior returns." All of the following statements are true about this statement EXCEPT:
A. there is a high risk that the registered representative is churning his accounts
B. the registered representative has made a prohibited performance guarantee to his customers
C. the registered representative appears to be disregarding the requirement to determine suitability for each customer
D. the registered representative has failed to disclose the remuneration received from each transaction, as required under industry rules

Answer 1

Answer:

D. the registered representative has failed to disclose the remuneration received from each transaction, as required under industry rules.

Explanation:

This is the only statement that does not apply to this situation accurately. It is clear from these lines that the registered representative is most likely churning his accounts. Moreover, the representative is making prohibited performance guarantees to customers. Finally, the representative appears to disregard the fact that suitability needs to be determined for each customer.