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Series 63: Regulation of Broker-Dealers & Agents
Series 63 practice questionmediumSuitability and compensation conflicts

A junior banker recommends a commission-based investment product that pays a higher commission than alternatives. Under the USA, which factor is MOST relevant in determining whether the recommendation is a violation?

  1. AWhether the product is on a pre-approved list
  2. BThe suitability of the recommendation for the client✓ Correct answer
  3. CThe client’s net worth
  4. DWhether the client has used other products from the firm
Explanation

Why BThe suitability of the recommendation for the client

Suitability is paramount (Section 404). Compensation is less relevant if the recommendation is suitable. A, C, and D may be relevant to other aspects of compliance but not core to compensation conflicts.

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