A registered representative receives an order from the trustee of a trust account to purchase speculative penny stocks. The trust document specifies that the trust is for income generation and capital preservation. What should the representative do?

ADecline the order and review the trust document to confirm the investment is inconsistent with the trust's stated objectives✓ Correct answer
BExecute the order since the trustee has full authority over the trust
CExecute the order but send a letter to the beneficiaries informing them of the trade
DContact the beneficiaries to get their approval before executing the trade

Explanation

Why A — Decline the order and review the trust document to confirm the investment is inconsistent with the trust's stated objectives

A trustee has a fiduciary obligation to invest in accordance with the terms of the trust document. If the trust specifies income and capital preservation as objectives, speculative penny stocks would be inconsistent with those objectives. The representative should review the trust document and decline orders that clearly violate the trust's investment guidelines, as executing such trades could expose both the trustee and the firm to liability.

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