NISM Certifications · NISM-Series-VIII: Equity Derivatives · Sales Practices and Investors Protection Services
Which of the following best describes the obligation of a stock broker when recommending derivative products to a client?
The broker must ensure the derivative product is suitable for the client's risk profile and financial situation. Recommendations should reflect the client's knowledge and capacity to bear losses, with transparent disclosure of charges and no assured returns.
- AEnsure the product is suitable for the client's risk profile and financial situationCorrect
- BRecommend the highest-margin product to maximise brokerage
- CAvoid disclosing charges to keep the client comfortable
- DGuarantee minimum returns on the recommended strategy
Explanation
Sales practices require suitability assessment based on the client's knowledge, experience and financial position. Guaranteeing returns or hiding charges is prohibited.
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