Series 7 practice questionhardReferral Programs and Networking — Bank Broker-Dealer Arrangements
A broker-dealer has a networking arrangement with a bank. Which of the following must be clearly disclosed to customers at or prior to the time of account opening to comply with applicable regulations?
- AThat the broker-dealer is a wholly owned subsidiary of the bank
- BThat customers will receive a bonus if they maintain a certain account balance
- CThat the investment products offered are only available to bank employees
- DThat securities are not FDIC insured, may lose value, and are not guaranteed by the bank✓ Correct answer
Explanation
Why D — That securities are not FDIC insured, may lose value, and are not guaranteed by the bank
Regulations require clear disclosure that securities are not FDIC insured, may lose value, and are not guaranteed by the bank to avoid customer confusion about the risks involved.
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