NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Ethical Issues
An adviser has a client who is a 68-year-old retired teacher with low risk tolerance and needs regular income. The adviser, wanting to meet a sales target, recommends a high-risk sectoral equity scheme. Which duty has the adviser mainly violated?
The adviser has violated the duty to give suitable advice based on the client's profile. A low-risk retiree needing regular income should not be sold a high-risk sectoral equity scheme just to meet the adviser's sales target, as this puts adviser interest above client interest.
- ADuty to provide suitable advice based on the client's profileCorrect
- BDuty to maintain records for the stipulated period
- CDuty to file periodic returns with the regulator
- DDuty to seek renewal of the certification
Explanation
Advice must match the client's risk profile, needs, and circumstances. A retiree with low risk tolerance and an income need is unsuited to a high-risk sectoral fund, and the recommendation is driven by the adviser's own target. Record keeping, filings and certification are not the issue described.
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