SERIES 65 CHAPTER 14 PART 2
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, an investment adviser may not borrow money from which of the following clients?
A federal covered investment adviser not affiliated with this adviser
Which of the following statements regarding an investment adviser's use of a full-service broker for an account over which the adviser has investment discretion is true?
A full-service broker may be used if the charges are reasonable in relation to the advice, analyses, or other services provided.
For purposes of safeguarding customer information, which of the following would be considered a covered account?
A margin account in the name of Mary Beth Simmons
Which of the following are examples of the prohibited business practice known as front running of blocks?
A securities professional purchases call options in a stock immediately ahead of entering an order from an institutional client to purchase a block of the stock.
Which of the following fee arrangements is legal under the Investment Advisers Act of 1940?
Adviser A charges an annual fee of 0.5% of the value of the client's account, due on the first day of the client's fiscal year.
According to North American Securities Administrators Association's (NASAA) Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, which of the following practices is not unethical?
An agent of a broker-dealer exercised discretion in deciding the time that a sale took place during the trading day without expressed written discretionary authority.
An investment adviser representative with a registered investment adviser would like to structure an arrangement for a new advisory account in which profits and losses in the account will be shared with the client. Under the USA, which of the following statements is TRUE?
An investment adviser representative may not share in the profits and losses in an advisory client's account.
Which of the following statements regarding discretionary accounts is true?
An order in which an investor designates the security's name, the number of shares, and whether to buy or sell and gives the agent discretion as to time and price only is not considered discretionary.
A federal covered investment adviser would like to charge a client a performance fee based on a selected benchmark. The client has $400,000 invested with the adviser but has a net worth of $2,250,000, of which $350,000 represents an investment account, 50% of which is shared with his cousin. Which statement is true?
Because we can allow none of the jointly held property, this client does not have the necessary net worth to qualify for a performance-based compensation program.
Which of the following actions taken by an agent is not prohibited?
Borrowing money from a bank that is the agent's client
An agent's customer says that ABC Corporation is about to be bought out. The customer wishes to place an order to buy ABC common stock based upon this yet unreleased information, which he claims he learned from an officer in the company. How should the agent respond in this situation?
Bring the information to the attention of the firm's supervisory principal named to handle such matters in the Supervisory Procedures Manual
Which of the following statements regarding investment adviser compliance rules is true?
Compliance procedures should be designed to prevent violations, as well as detect existing violations.
An agent learns of material, inside information regarding a company that is publicly held. Which of the following with respect to the information would not violate the Uniform Securities Act?
Discussing the situation with a superior or compliance officer in the agent's firm
Jessica is an investment adviser representative for an SEC-registered investment adviser. She lives in State X and receives a letter from a former college friend requesting a contribution to the friend's political campaign for governor of State Y. As it happens, Jessica's firm provides advisory services to State Y's employee retirement fund and Jessica actively solicits business from other state agencies. Which of the following actions would be permitted to Jessica under the SEC's pay-to-play rule without causing any concerns to her firm?
Donating a maximum of $150 to the campaign
Which of the following is an unethical practice for agents of broker-dealers?
Effecting securities transactions not recorded on the books of the employing broker-dealer without prior written authorization
Which of the following statements regarding a state-registered investment adviser with custody of customer assets is true?
Every three months, the adviser must send an itemized account statement to each customer whose assets are held in custody.
Terms used to describe the practice of buying and selling securities to create the appearance of active trading volume include: wash trades. matching orders. front running.
I and II.
Which of the following could be a red flag regarding identity theft? I. Receipt of a credit card for which no application was made II. Receipt of a replacement credit card two months before the expiration date of the current card III. Receipt of a notice of a change of address on a credit card account that was not made by the account holder IV. Receipt of a notice from the credit card company of an offer for a 0% balance transfer
I and III
Which of the following statements relating to Form ADV-E are correct? I. The form is completed by an investment adviser who maintains custody of customer funds and/or securities. II. The form is completed by the independent public accountant who examines the funds and/or securities in the custody of an investment adviser. III. The form is submitted by the independent public accountant who examines the funds and/or securities in the custody of an investment adviser. IV. The form may be used to amend the investment adviser's registration.
I and III
The Investment Advisers Act of 1940 addresses the issue of investment advisers (IAs) maintaining custody of client funds and/or securities. In which of the following cases would that act consider the IA to have custody? I. Possession of client funds or securities II. Any arrangement under which the IA is authorized or permitted to withdraw client funds or securities maintained with a custodian upon the IA's instruction to the custodian III. Any capacity that gives the IA or a supervised person legal ownership of or access to client funds or securities IV. Receipt of a check made out to a third party
I, II, and III
Which of the following are required to execute orders in a customer's discretionary account? I. The customer must authorize each transaction in writing. II. Trades must be in accordance with the account holder's investment objectives. III. The rules relating to best execution are the same as for a nondiscretionary account. IV. Discretionary orders must take place before nondiscretionary orders.
II and III
Under the Uniform Securities Act, which of the following investment advisers would be required to include a balance sheet in their brochures? I. An adviser who exercises discretion in client accounts II. An adviser who maintains custody over client funds and securities III. An adviser who maintains less than $35,000 in net worth IV. An adviser who, six or more months in advance, collects prepaid fees of more than $500
II and IV
Which of the following statements is true about the compensation of a registered investment adviser?
The investment adviser may be compensated on the basis of the average total assets of the portfolio over a period of time.
Under the Uniform Securities Act, an agent who deliberately gives a fictitious quote to a customer
has committed a fraudulent and unlawful business practice
A customer in a low tax bracket is retired and living on a fixed income. An agent constructs a portfolio consisting of high-yield bonds and small-cap stocks for this customer. If this came to the attention of the Administrator, under the Uniform Securities Act, the Administrator would probably
take action against the agent for selling unsuitable investments.
An investment adviser registered in State A decides it wishes to maintain custody of customer assets. As long as the securities laws of State A do not prohibit custody, the investment adviser would have to promptly notify
the Administrator by filing an amended Form ADV that it is going to maintain custody.
After receiving complaint letters from an irate customer, the agent decides against a reply and discards the letters. Under the Uniform Securities Act,
the agent must forward all written complaints to a supervisory person.
If the Administrator were examining the actions of a particular agent to determine whether the agent engaged in churning a client's account, focus would be placed upon
the client's objectives, financial resources, and the character of the account
Discretion is exercised when a securities professional determines all of the following except
time or price.
NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents lists which of the following as an unethical business practice by a broker-dealer?
Engaging in a pattern of unreasonable and unjustifiable delays in the delivery of securities purchased by any of its customers
The Uniform Securities Act empowers the Administrator to begin proceedings to revoke the registration of an investment adviser when certain violations are suspected. Which of the following is considered serious enough to warrant a revocation?
Failure to supervise the activities of investment adviser representatives
An investment adviser (IA) has recommended funds sponsored by the GEMCO Fund group for many years. One of his clients who has been in several GEMCO Funds for over 10 years sends the IA a referral suggesting that the IA put his friend into the same GEMCO Funds as he owns. Under what circumstances would this be the appropriate action to take?
GEMCO Funds are suitable for the referred client.
Jonathon is employed by Frederick's Investment Advisory Service strictly to telemarket for prospective new clients. Which of the following is true under the Uniform Securities Act?
He is subject to the antifraud provisions of the act.
A BCP should be designed to protect the firm's clients in the event of which of the following? I. A natural disaster such as a hurricane or tornado II. Acts of terrorism III. Pregnancy of one of the firm's IARs IV. Climate change
I and II
Examples of identity theft would include which of these? I. Taking over an individual's credit card account II. Applying for new credit cards in the compromised individual's name III. Lending money in the name of the compromised individual IV. Purchasing lottery tickets in the name of another individual
I and II
Under the Uniform Securities Act, when may an investment adviser legally have custody of money or securities belonging to a client? If the Administrator has not prohibited this practice If the investment adviser has notified the Administrator that it has custody Only as long as the adviser does not also have discretionary authority over the account
I and II
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, it is unethical for an investment adviser representative to do which of these? I. Tell clients that fees will be reduced by the amount of any commissions earned, when in fact a reduction will be made only if the client brings it to the adviser's attention. II. Avoid mentioning to clients that she was expelled from college before graduating. III. Tell clients that her firm's system for timing the market is based on technical factors, when in fact she uses intuition.
I and III
Your manager is reviewing the activity in your customer accounts to detect trading irregularities. Which of these are among the factors the manager will look for to determine if churning is occurring? I. The financial resources of the account II. The number of winning trades versus losing trades III. The objectives of the account IV. The marital status of the customer
I and III
Which of the following would not constitute custody of a client's account under the Investment Advisers Act of 1940? I. Client prepayment of $1,000 of advisory fees, six months in advance II. Having temporary custody of a client's securities III. Depositing client funds in bank accounts accessible by the investment adviser
I only
Which of the following transactions are prohibited? I. Borrowing money or securities from a high-net-worth customer II. Selling speculative or hot issues to a retired couple of modest means on a fixed income III. Failing to follow a customer's orders to prevent investment in a security not adequately covered by well-known securities analysts IV. Backdating confirmations for the benefit of the client's tax reporting
I, II, III, and IV
In which of the following third-party transactions would an investment adviser be required to make disclosure to the client of compensation received? I. An investment adviser recommends an affiliated REALTOR® to a client and receives compensation from the REALTOR®. II. An investment adviser, who is also an agent for an insurance company, sells policies from the company to his clients. III. An adviser who is affiliated with a broker-dealer receives commissions on sales recommended to clients through the broker-dealer.
I, II, and III
Under the NASAA Model Rule on Custody Requirements for Investment Advisers, an investment adviser who has custody of clients' securities or funds must do which of these? I. Keep funds deposited in accounts containing only client funds. II. Be subject to a surprise audit performed at least annually by an independent accountant. III. Send clients statements at least once every three months showing balances.
I, II, and III
Under which of the following circumstances does NASAA allow an investment adviser to charge performance-based fees? I. The client must initially have $1.1 million under management or a net worth in excess of $2.2 million. II. Compensation paid in this way must be for gains reduced by losses. III. Disclosure must be made that the fee arrangement may create an incentive for the investment adviser to make investments that are riskier or more speculative than would be the case in the absence of a performance fee.
I, II, and III
When it comes to borrowing and lending money, NASAA's Model Rules prohibit activity that would compromise the objectivity of securities professionals. Which of the following are not prohibited practices? I. A broker-dealer lending money to a client to purchase additional securities II. An agent taking out a car loan from a bank whose branch manager is a client of that agent III. An investment adviser borrowing money from an affiliated broker-dealer IV. An investment adviser lending money to a client to enable that client to maintain the minimum required asset level in the account
I, II, and III
Under the NASAA Model Custody Rule, an investment adviser is considered to have custody of client assets if which of these are true? I. The adviser inadvertently receives a check from a client for a purchase that is made payable to the investment adviser and does not return the check within 24 hours. II. The adviser inadvertently receives a check from a client for a purchase that is made payable to a third party and does not forward the check within 3 business days. III. The adviser inadvertently receives stock certificates from a client and does not forward them within 3 business days. IV. The adviser inadvertently receives stock certificates from a client and does not return them within 3 business days.
II and IV
The term "churning" means I. switching a client's account from an income fund to a growth fund II. excessively trading securities in the account of a client primarily for the purpose of generating commissions for the agent III. trading unsuitable securities in a client's account IV, a bond swap in a customer's account for tax benefits
II only
Which of the following would be causes for concern about cybersecurity? I. A broker-dealer keeps all the firm's financial records in a ledger book. II. A broker-dealer stores some of the firm's financial records electronically. III. A broker-dealer's agents operate as independent contractors and maintain devices that access personally identifiable information about clients. IV. A broker-dealer's bookkeeper prefers to do the books from home on a personal computer.
II, III, and IV
Allen Richards is the next-door neighbor of Marc Terry, the CEO of a Nasdaq Stock Market security. Mr. Terry tells Mr. Richards that a major NYSE-listed corporation is in the process of submitting an offer to buy out his company at a very handsome premium over the current market price. Mr. Richards would be permitted to I. immediately purchase shares of Mr. Terry's company II. immediately purchase shares of the NYSE-listed company III. purchase shares of Mr. Terry's company once the news becomes known to the investing public IV. purchase shares in the NYSE-listed company once the news becomes known to the investing public
III and IV
Which of the following investment adviser compensation arrangements is permitted under the Uniform Securities Act? I. The value of a client's account at the start of the year is subtracted from the value at the end of the year. The adviser's compensation is 5% of the difference. II. The adviser charges an annual fee of $2,000, but the agreement calls for a waiver of the fee if the client's portfolio value has not increased by at least $20,000. III. The adviser charges a fee of 1% of the average value of the account portfolio during the year. IV. The adviser charges a flat fee of $1,000 if the client's portfolio assets are $100,000 or more or $2,000 if the client's assets increase to $200,000 or more.
III and IV
Which of the following statements regarding brokerage and advisory activities under the USA are true? I. It is not unlawful for an investment adviser or broker-dealer to employ any device, scheme, or artifice to defraud in the sales of securities to institutional investors because the USA is designed to protect individual investors. II. Under the USA, it is unlawful for an investment adviser to deceive a person when not providing advice to that person. III. Sanctions for both investment advisers and broker-dealers include administrative proceedings, judicial injunctions, and civil and criminal prosecutions. IV. It is unlawful for any person, whether technically defined as an investment adviser or not, to deceive another person for compensation as to the value of securities.
III and IV
A client who has a margin account is out of town for a week. The securities in the client's account fall dramatically, which requires the client to make immediate deposits into the account. Which of the following can the agent do to assist the client?
Make every reasonable attempt to contact the client.
There are certain circumstances under which clients might wish to give their agents discretionary power over their account. An agent empowered to do which of the following would be considered to be using discretion?
Picking the specific security
Which of the following activities would not be a violation of the ethical standards to be followed by investment advisers and their representatives?
Recommending an estate-planning attorney to clients who have inquired about ways to potentially reduce their estate tax liability
Fairweather Securities Corp. (FSC), a registered broker-dealer, has invited several IARs from Econometric Advisory Services (EAS), a registered invested adviser that directs transactional business to FSC, to a seminar featuring a disquisition on current economic trends being presented by a leading economist. It would be permitted for FSC to cover which of the following expenses?
Registration fees for the seminar
The NASAA Model Rule on Business Continuity and Succession Planning requires registered investment advisers to have a business continuity and succession plan (BCP). Which of the following is not an issue unique to advisers structured as a sole proprietorship?
Risks that could interrupt operations and client service include equipment and/or system failures and destruction of records.
Mary bought 1,000 shares in the morning and sold 1,000 shares of the same security in the afternoon. Under the Securities Exchange Act of 1934's rules dealing with the regulation of the use of manipulative and deceptive devices, which of the following statements is true?
She has violated the act only if she was trying to create market activity for the security to give a misleading appearance.
Thomas Smith, a registered agent of XYZ Broker-Dealer, believed that his client's security was overvalued. If Smith exaggerated the amount by which the security was overpriced to protect the client from a downturn in the price of the security, each of the following statements is true except
Smith provided investment advice while acting in a sales capacity, which is a prohibited practice
As defined in the Uniform Securities Act, in which of the following cases would an investment adviser (IA) not be considered to be maintaining custody?
The IA receives a check made payable to the IA and returns it within three business days.
Which of the following is not true regarding the antifraud provisions of the Securities Exchange Act of 1934?
The act bars the use of arbitrage by broker-dealers.
Which of the following statements regarding advisers who maintain custody over client accounts is not true?
The adviser must arrange for the audit of client accounts by an independent public accountant on a systematic basis at least once a year.
Which of these has the SEC not enumerated as a specific item that must be included in written compliance manuals for investment advisers?
The advisory firm should indicate the educational requirements necessary for employment.
Which of the following would not be considered evidence of custody of a client's funds or securities?
The investment adviser has discretionary authority over the client's account.
Which of the following would be considered when determining whether excessive trading has occurred in a client's account?
The nature of the client's financial objectives
Which of the following is not among the powers granted to the Administrator under the Uniform Securities Act (USA)?
The power to require individuals associated with federal covered advisers in the capacity of investment adviser representatives to register as such in his state as long as the investment adviser has a place of business in the state
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following practices is appropriate for an adviser who does not have custody or discretion over clients' assets?
Tom manages 35 clients who suffer financial loss while he is trying to contact them for authorization to trade.
Which of the following documents must an existing customer sign to establish a discretionary account?
Trading authorization
Wilson, a registered agent, receives an order from Miller, her customer, for an unusually large order of common stock in XYZ Incorporated. Miller states that he overheard the CFO of XYZ, Inc., telling his golfing partner that XYZ was close to being acquired by Monolith Communications, Incorporated. In light of ethical standards under the Uniform Securities Act, which of the following actions is most acceptable?
Wilson tells her immediate supervisor (principal) of Miller's intent to trade based upon nonpublic (inside) information.
Walt and Bryan are old friends who are agents with different broker-dealers. Bryan attends one of Walt's investment seminars and, at a prearranged point in the presentation, stands up and exclaims that his rich brother-in-law wisely purchased the same investment. This action is
a deliberate attempt to mislead and deceive investors
A person who is vested with legal rights and powers to be exercised for the benefit of another is known as
a fiduciary.
An investment adviser owes an undivided loyalty to its clients and therefore is considered to be
a fiduciary.
If an agent misrepresents the price of a customer's stock by $10 per share to encourage the client to sell, this activity is
a misrepresentation and a fraudulent act
An elderly widower explains to his investment adviser representative (IAR) that he requires his investments to provide the maximum current income. The IAR should recommend
a mutual fund that matches the investor's stated objective.
If an investor bought stock on one exchange and sold it at a higher price on another exchange, this practice constitutes
a perfectly acceptable market arbitrage
A fiduciary is
a person entrusted with the duty of acting for the benefit of another party.
All of the following actions, if performed by a registered agent, would be considered a prohibited activity under the Uniform Securities Act except
accepting an order from a client wishing to purchase a nonexempt security that is not properly registered in the state
Under the Uniform Securities Act, it is not considered fraudulent if an agent
actively solicited orders in unregistered exempt securities
MaryBeth is an agent with QuickTrade Securities, a subsidiary of QuickLoan Bankcorp, which is a holding company that also owns QuickIssue Capital Markets, an underwriter specializing in bringing new issues to market. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, MaryBeth would be permitted to split commissions resulting from securities transactions with any of the following individuals except
an agent properly registered with USATrade Securities.
An order is received from one of your clients to purchase 200 shares of GEMCO common stock at 45 GTC. Two days later, while at a luncheon meeting with a different client, you are informed by that individual that the inside scoop is that GEMCO is going to be the subject of an FBI investigation. An hour after you return from lunch, you see an execution report for the 200 shares at 44.90. Under the Insider Trading and Securities Fraud Enforcement Act of 1988, you
are not in violation because the order was placed before you learned of the inside information
An agent follows the recommendations of another agent in the office with an impressive performance record, and based on the security the successful agent recommends, the representative recommends it to all his clients. According to NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, this activity is prohibited
because he failed to determine suitability for his clients and the reasonableness of the recommendations.
NASAA has a Model Rule dealing with sales of securities at financial institutions. The rule applies exclusively to broker-dealer services conducted by broker-dealers on the premises of a financial institution where retail deposits are taken. Under the rule, financial institution means federal and state-chartered banks, savings and loan associations, savings banks, and credit unions. No broker-dealer shall conduct broker-dealer services on the premises of a financial institution where retail deposits are taken unless the broker-dealer complies initially and continuously with all of the following requirements except
being under common control with the financial institution.
The prohibited practice of an investment adviser placing the same security in the accounts of all of the firm's clients is known as
blanket recommendations
If a customer is upset with her agent and sends him a letter of complaint, under the Uniform Securities Act, the agent should
bring the customer complaint to a supervisory person immediately.
A client opens a discretionary account with an IAR over the phone and tells her to buy 3,000 shares of any technology stock that she thinks is suitable. One month later, the stock has dropped and the IAR determines that it is time to cut the losses and get out of the stock. In checking the records, the IAR discovers that the written discretionary authorization form has not yet been received. Under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, the IAR should
contact the client and indicate that the firm cannot act with discretion until the authorization form is received.
An agent omits facts that a prudent investor requires to make informed decisions. Under the Uniform Securities Act, this action is
fraudulent for both exempt and nonexempt securities
An agent tells his customer that a corporation has graduated to the level of quality acceptable for trading on the New York Stock Exchange and, therefore, has less market risk. If he recommends the stock to the customer based on the exchange's listing requirements, the agent has acted
fraudulently, because listing on the New York Stock Exchange does not reduce the client's loss exposure and, therefore, the agent misled his client
The practice of stealing an individual's personal information for criminal activity is generally referred to as
identity theft.
An agent's client calls on Monday to discuss the current market situation. They discuss how 100 shares of Kapco common stock would be an appropriate addition to the client's portfolio. On Thursday, the client calls and tells the agent to place an order for the Kapco stock at whatever price the agent feels is best. The agent waits until Friday, purchasing the stock at a price $2 per share below Thursday's low. In this case, the agent acted
improperly; the order should have been placed on Thursday.
An investment adviser who trades on material nonpublic information is
in violation of the antifraud provisions of the Uniform Securities Act.
Witherspoon, Eustis, and Brahmin (WEB), an investment banking firm and SEC-registered investment adviser, is the principal underwriter for MTEX's upcoming stock issue. Lynn is an analyst and IAR with WEB, and she learned from an employee in MTEX's programming department that a serious problem was recently discovered in the software program of its major new product line. In fact, the problem is so bad that many customers have canceled their orders with MTEX. Lynn checked the stock's prospectus and found no mention of this development. The red herring prospectus has already been distributed. According to WEB's required code of ethics, Lynn's best course of action is to
inform her immediate supervisor at WEB of her discovery.
Under the Investment Advisers Act of 1940, an investment adviser who has custody of clients' funds and securities must
keep the clients' securities and funds segregated and identified.
One business succession issue that applies to virtually all investment advisers is
loss of the designated regulatory contact person.
The illegal business practice of purchasing and selling a security for the purpose of creating an appearance of market activity is known as
matched orders
Meera is a client of Panache Preferred Investments (PPI), a broker-dealer registered in 17 states and with the SEC. Meera gave a standing order to PPI in writing that her annual tax information should be sent directly to her CPA. Several years after this arrangement came into effect, a change in tax laws makes it urgent that a certain security in Meera's account be sold. Meera is vacationing at a remote island location that has no telephone or internet access. Because of the urgency, the CPA contacted the agent handling the account and, after explaining the situation, gave an order to liquidate the relevant position. The agent handling the account
must explain to the CPA that without written trading authorization, the sell order cannot be accepted.
An agent employed at First Securities, an independent broker-dealer, shares commissions with his uncle, who is employed at ABC Securities, an independent broker-dealer with offices in the same state. This arrangement is
prohibited because the broker-dealers are not under common ownership or control.
All of the following are unethical business practices of investment advisers as determined by NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers except
releasing confidential customer information because of a court subpoena
Rachel is an agent registered with a broker-dealer in this state. It would be prohibited for her to
solicit sales of a nonexempt security whose registration is not yet effective.
All of the following statements regarding the role of the chief compliance officer of an investment adviser are correct except
the chief compliance officer should have a minimum of five years' experience in securities compliance in matters involving public customers or accounts.
The institutional trading desk of a major broker-dealer received a substantial purchase order for 20,000 shares of XYZ common stock from one of its clients. While completing the paperwork to begin the order sequence, the firm decided to purchase shares of XYZ for its proprietary account. Under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents,
this would be the prohibited practice of front running of block transactions.
Strategic Investment Managers Company (SIMCO) is an investment adviser registered with the SEC. It has over 1,000 clients, about 53% of whom have granted SIMCO discretionary authority. From time to time, SIMCO feels the same security is appropriate for a number of its accounts and turns in a bunched order. When the order is filled at different prices, the shares are allocated
to all accounts proportionately, regardless of the size of the individual account.
In response to high stock market volatility, if an investment adviser has all clients immediately sell their equity holdings and reallocate the proceeds to Treasury bills, under the Uniform Securities Act, this is
unethical because Treasury bills may not be appropriate for all the adviser's clients.
