Series 63 practice questionhardFraudulent Practice: Misuse of Client Funds
An agent receives a client’s check for investment and temporarily uses it to cover another client’s margin call. Under USA Section 501, this is:
- APermitted if the funds are returned within 24 hours
- BA fraudulent misuse of client funds✓ Correct answer
- CPermissible if the client consents in writing
- DAllowed if the firm is solvent
Explanation
Why B — A fraudulent misuse of client funds
Using client funds for any purpose other than as directed is fraudulent under Section 501. Timing (A), consent (C), or firm solvency (D) do not excuse the misuse.
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