Series 63 practice questioneasyProhibited Practices — Unauthorized Transactions
An agent executes a trade in a customer's account without the customer's prior knowledge or authorization and without discretionary authority. This is considered:
- AAn unauthorized transaction, which is a prohibited practice✓ Correct answer
- BAcceptable if the trade is profitable for the customer
- CPermissible if the agent notifies the customer within 24 hours
- DA routine exercise of professional judgment
Explanation
Why A — An unauthorized transaction, which is a prohibited practice
Under NASAA's Statement of Policy on Dishonest or Unethical Business Practices, executing transactions without the customer's prior authorization and without written discretionary authority is a prohibited practice. It is a violation regardless of whether the trade is profitable, as the customer has the right to control activity in their own account.
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