Series 63 practice questionmediumProhibited Practices — Unsuitable Recommendations
Agent Kelly recommends that a 78-year-old retired widow invest her entire life savings in speculative penny stocks. This recommendation is MOST LIKELY a violation because:
- APenny stocks cannot be sold to individuals over age 65
- BThe recommendation is unsuitable given the client's age, financial situation, and risk tolerance✓ Correct answer
- CAgents are not permitted to recommend any specific securities
- DThe client should only invest in municipal bonds
Explanation
Why B — The recommendation is unsuitable given the client's age, financial situation, and risk tolerance
Under NASAA's Statement of Policy on Dishonest or Unethical Business Practices, recommending securities without reasonable grounds for believing the recommendation is suitable based on the client's financial situation, investment objectives, and risk tolerance is prohibited. A speculative investment of an elderly widow's entire life savings is clearly unsuitable.
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