SIE practice questionmediumChurning
Which best describes 'churning' in a brokerage account?
- ASelling underperforming stocks
- BTrading based on material nonpublic information
- CFailing to diversify investments
- DExcessive trading to generate commissions✓ Correct answer
Explanation
Why D — Excessive trading to generate commissions
Churning is excessive trading in a client's account to generate commissions, violating suitability and ethical standards. Trading on nonpublic information is insider trading, not churning.
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