Series 7 practice questionmediumDiscretion and Account Supervision 3
A customer asks a representative to request a trusted contact person on a retail account application. What is the best response?
- AThe trusted contact helps the firm address concerns about exploitation or diminished capacity✓ Correct answer
- BThe trusted contact automatically becomes a co-owner
- CThe trusted contact may place trades without a power of attorney
- DThe trusted contact replaces the beneficiary designation
Explanation
Why A — The trusted contact helps the firm address concerns about exploitation or diminished capacity
Discretionary activity is heavily supervised because it gives the representative authority to act without obtaining contemporaneous consent for every trade detail. FINRA rules allow limited same-day time and price discretion, but broader trading discretion requires proper written authorization and supervision.
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