NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Ethical Issues
Adviser Meera Iyer recommends a direct plan of a mutual fund to a client, but she also holds units of the same scheme in her own account and plans to sell them next week. Which step best satisfies the ethical requirement regarding this situation?
She should disclose her holding and her intended sale to the client before the client acts on the advice. Conflicts of interest must be disclosed upfront so the client can evaluate the recommendation objectively. Disclosing later or only on request does not meet the ethical requirement.
- ASay nothing, as her holding is a personal matter
- BDisclose the holding and intended sale to the client before the advice is acted onCorrect
- CDisclose only if the client asks
- DDisclose it after the client has invested to avoid influencing the decision
Explanation
Advisers must identify and disclose conflicts of interest to clients upfront, so the client can judge the advice. Her planned sale may be affected by the client's purchases, so this is a material conflict. Disclosure after investing or only on request defeats the purpose.
Did you get it right without looking?
One question tells you little. A timed set on Ethical Issues shows your real accuracy, how long you take and where you lose marks.
More Ethical Issues questions
- Adviser Meera Iyer learns from a client's casual remark that the client's relative works at a listed company and has shared unpublished pric…
- Which practice by an investment adviser best reflects the ethical principle of confidentiality towards clients?
- Mrs. Nair, aged 68, tells her investment adviser she depends on investment income for living expenses and cannot tolerate capital loss. The …
- An investment adviser registered with SEBI learns that a close friend plans to buy shares of a listed company on the basis of the adviser's …
- Caselet: Rakesh, a 58-year-old retiree, has told his investment adviser that he cannot tolerate losses on his retirement corpus. The adviser…
- Caselet: An adviser charges fixed annual fees of Rs 30,000 under a signed agreement. Midway through the year, the adviser also accepts a Rs …