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PERIODIC PAYMENT PLANS

When recommending or advertising a periodic payment plan, the following must be disclosed:

• A statement that a profit is not guaranteed.

• A statement that investors are not protected from a loss.

• A statement that the plan involves continuous investments, regardless of market conditions.

DISCLOSURE OF CLIENT INFORMATION

Investment advisers may not disclose any information regarding clients to a third party without the client's expressed consent or without a court order. If the client is an issuer of securities and the broker dealer is an underwriter, transfer agent, or paying agent for the issuer, then the broker dealer is precluded from using the information it obtains, regarding the issuer's security holders for its own benefit.

BORROWING AND LENDING MONEY

A registered representative or an investment adviser may not borrow money or securities from a client unless the client is a bank or other financial institution that is in the business of lending money. An adviser may not lend money to clients. Broker dealers making margin loans are excluded from this rule.

DEVELOPING THE CLIENT PROFILE

Recommendations to an advisory client must be suitable based on the client's investment objective and client profile. The adviser should obtain enough information about the customer to ensure that the recommendations are suitable based on a review of the client's:

• Investment objectives

• Financial status

• Income

• Investment holdings

• Retirement needs

• College and other major expenses

• Tax bracket

• Attitude towards investing

The more you know about a client's financial position, the better you will be able help the client meet his or her objectives. You should always ask questions like:

• How long have you been making these types of investments?

• Do you have any major expenses coming up?

• How long do you usually hold investments?

• How much risk do you normally take?

• What tax bracket are you in?

• How much money do you have invested in the market?

• Have you done any retirement planning?

• How old are you?

• Are you married?

• Do you have any children?

• How long have you been employed at your current job?

Advisers, who help people invest to meet a specific objective, must make sure that their recommendations meet that client's objective. Should a person have a primary and a secondary objective, an adviser must make sure that the recommendation meets the investor's primary objective first and the secondary objective second. When developing the client's profile, advisers should also calculate the client's:

• Assets

• Liabilities

• Net worth

• Monthly discretionary cash flow or income

 
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