Appears in our practice questions for: Series 63, Series 65
Conduct prohibited by professional or regulatory standards because it is unfair, deceptive, conflicted, abusive, or inconsistent with duties owed to clients even if not described by a single fraud label.
Practice questions using Unethical Practice
Original questions written against the published FINRA and NASAA exam content outlines — not actual exam questions. Every choice is explained.
Failing to follow a customer's reasonable and lawful instructions is:
A.Allowed if the agent disagreesAn agent may argue against an instruction and may decline to accept the business, which is what makes this tempting. What the agent may not do is quietly substitute their own judgment, because the assets and the decision belong to the customer.
B.Standard discretionDiscretion lets an agent choose details within the authority the customer granted. It is not a power to override a specific instruction the customer has already given, which is direction rather than a gap to be filled.
C.Required by the USANothing directs an agent to disregard a customer. An unlawful instruction would have to be refused, but the stem specifies that these instructions are both reasonable and lawful, which removes the only justification for not following them.
D.A prohibited practiceCorrect - agents must follow lawful instructions.
Why: Ignoring a customer's reasonable, lawful instructions is a prohibited/unethical practice.
Effecting a trade in a customer account without the customer's authorization is:
A.Permitted if profitableThe customer never accepted the risk that generated the gain. Had the position moved the other way they would be holding a loss they never agreed to, which is why authorization is measured before the order is entered rather than by how it turned out.
C.Allowed with verbal after-the-fact noticeTelling the customer afterward simply informs them of a violation that is already complete. Notice is not consent, and the authority to trade has to exist at the moment the order goes in.
D.Standard for discretionary-looking accountsAn account that looks discretionary is not a discretionary account. That power exists only where the customer signed a grant of authority the firm accepted, and no informal understanding or history of cooperation creates it.
Why: Unauthorized transactions are a prohibited and unethical practice.
8 questions in our bank involve Unethical Practice. Practise them with instant explanations.
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