CPH Exam |321 QUESTIONS| 39 PAGES| WITH COMPLETE SOLUTIONS

What does suitability mean for recommendations? correct answer: It means ensuring all recommendations: - Take into account the client' s unique circumstances and investment objectives - Are based on the adviser's understanding of the client's personal and financial situation, as well as knowledge of the various available investment options What does the KYC rule state? When must it be done? correct answer: States that an advisor must use due diligence to learn the essential facts relevant to every client and every dollar It must be done each time: 1) A trade is accepted 2) a recommendation is made by the brokerage 3) securities are transferred to the brokerage 4) a different representative is taking over the account 5) A material change in the KYC information for the account takes place What information is included in KYC? correct answer: - person circumstances (investment knowledge, risk tolerance) - financial situation - investment objectives - age and time horizon What are the two main types of retail brokerage firms? What do they offer? correct answer: 1) Full-service brokerage firms: These firms offer investment advice (so they charge higher commission) 2) discount brokerage firms: these firms do not offer investment advice, they just help clients purchase and sell shares (so commission is less) Does full-service brokerage firms and discount brokerage firms have to meet suitability rules? correct answer: Full-service brokerage firms do because they are providing advisory services Discount brokerage firms because they do not offer advisory services can be exempt, under the following conditions: - Broker must act as a completely separate legal entity to any subsidiary that does grant advice - The separate entity must have completely separate business cards, letterh