Series 63 practice questionhardProhibited Practices — Scenario
Agent Robert guarantees a new client that her $100,000 investment will grow to at least $150,000 within one year. When the account loses value, the client sues. Which prohibited practice has Robert committed?
- AChurning
- BSelling away
- CGuaranteeing a customer against loss in a securities transaction✓ Correct answer
- DFront-running
Explanation
Why C — Guaranteeing a customer against loss in a securities transaction
Under USA Section 502 and NASAA model rules, guaranteeing a customer against loss or guaranteeing a specific return on a securities investment is a prohibited practice. Securities investments inherently carry risk, and no agent may promise a guaranteed outcome. Robert's promise of growth to $150,000 constitutes a prohibited guarantee.
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