NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Ethical Issues
Ms. Kapoor, a 58-year-old retiree with a low risk appetite, wants steady income. Her adviser, Mr. Rao, is under pressure from his employer to meet a target for a high-risk structured product. He explains its risks fully, notes it is above her risk profile, but she insists after being told it is unsuitable. Which course is most appropriate for Mr. Rao?
Mr. Rao should not recommend the product as suitable, should keep honest records of the advice given and her insistence, and must not misstate her risk profile or the product's risk. Sales targets never override the duty to act in the client's interest and maintain truthful documentation.
- ASell it since she was warned and has insisted, and keep no record
- BDecline to recommend it, document the advice given and her insistence, and not misrepresent it as suitableCorrect
- CSell it and record the risk profile as high so the file looks consistent
- DSplit the amount across the product and tell her it is now low risk
Explanation
The adviser must not recommend an unsuitable product and must not alter the risk profile or misrepresent risk to match a sale. Documenting the advice and the client's insistence protects both parties and keeps records truthful. Falsifying the profile or calling the product low risk is a clear ethical breach, and employer targets do not override client interest.
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