Series 7 practice questioneasyProduct Knowledge and Suitability Foundation 1
If a representative recommends frequent in-and-out trades in a conservative retiree’s account primarily to generate commissions, the likely violation is:
- Afree riding
- Bbreakpoint sale abuse only
- Cquantitative suitability, also known as churning✓ Correct answer
- Dselling away
Explanation
Why C — quantitative suitability, also known as churning
Even if individual trades could be justified in isolation, excessive activity in the aggregate can violate quantitative suitability. Churning occurs when trading is excessive in light of the customer’s profile and account objectives.
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