Series_63 Latest Exam Braindumps
Question 5: Joe Treader is the owner of a small, state-registered investment advisory firm that is on theverge of
becoming insolvent. One of his clients who has become like a mother to him is aware of his financial
difficulties and has offered to sell off some of the assets that he manages for her and loan him the
money
to get him through this period of economic
uncertainty until he is able to get on his feet again. Can Joe take her up on her offer?
A. Yes. Based on the facts presented, it is an unsolicited offer and, as such, Joe can (and should)
accept
it.
B. Yes, but only if Joe draws up a formal loan agreement with a fair interest rate, based on the going
market rates, stated in the agreement as well as a firm date for principal repayment.
C. No. As the client's investment adviser, he has a fiduciary relationship with the client. Entering a
loan
agreement with this client could lead to conflicts of interest.
D. Both A and B are true.
Correct Answer: C
Explanation: No, Joe cannot take his client's offer of a loan because it could lead to a conflict of
interest--if
not today, perhaps in the future--and as a fiduciary Joe will be expected to put this client's welfare
ahead
of his own. If it takes him a lot longer than expected to get on his feet again, he may be tempted to
act in
his own best interest.
