Unit ko samjho · NISM Series X-A
Ethical Issues
15 questions is unit mein
Sawaal aur jawaab English mein hain, kyunki NISM ka exam paper bhi English mein hota hai.
Is unit mein kya hai
- What does fiduciary responsibility mean for an investment adviser?
- An adviser's brother runs a company whose shares the adviser plans to recommend. What should the adviser do?
- A long-time client insists on moving her whole emergency fund into a small-cap fund, against the adviser's advice. What is the ethical approach?
- Which of these is part of SEBI's guidance to investors on dealing with investment advisers?
- Before engaging an investment adviser, how should an investor check that the adviser is genuine?
- An adviser's yearly compliance audit finds that several clients' risk profiles were incomplete. What is the right response?
- An adviser often tells clients to switch funds, though the switches add costs and do not improve their plans. What is the ethical problem?
- A journalist asks an adviser which well-known investors are clients. What should the adviser do?
- An adviser charges much more to a client who seems less financially aware, for the same service others get. Which principle is broken?
- In the United States, which law governs investment advisers and underpins their fiduciary duty?
- Under Australia's financial advice rules, how must an adviser act when giving personal advice to a retail client?
- Which statement best describes ethics in financial advice?
- A fund house offers an adviser an expensive holiday after the adviser's clients invest heavily in its schemes. What should the adviser do?
- An elderly client's son asks the adviser to move her savings into a risky business he runs. She seems unsure. What should the adviser do?
- An adviser's profile calls him a 'SEBI-approved expert with guaranteed returns'. What is wrong with this?
Zaroori ideas
Practice bank se · 1
What does fiduciary responsibility mean for an investment adviser?
Fiduciary responsibility means putting the client's interest first. The adviser must act honestly, with care, and without letting its own interests come first. Remember: A fiduciary puts the client's interest first.
Hint Common mistake: Thinking fiduciary duty means guaranteeing returns.
X-A-256Practice bank se · 2
An adviser's brother runs a company whose shares the adviser plans to recommend. What should the adviser do?
The adviser must disclose the conflict and keep the advice in the clients' interest. A family link can bias advice, so clients must know about it. Remember: Conflicts must be disclosed and managed so they never bias advice.
Hint Common mistake: Treating a family link as a private matter.
X-A-257Practice bank se · 3
A long-time client insists on moving her whole emergency fund into a small-cap fund, against the adviser's advice. What is the ethical approach?
The adviser explains the risks, records the advice given and the client's own decision, and never presents it as a recommendation. The record shows what was advised and what the client chose. Remember: When a client overrides advice, explain the risks and record both the advice and the decision.
Hint Common mistake: Recording a client's own decision as the adviser's recommendation.
X-A-258Practice bank se · 4
Which of these is part of SEBI's guidance to investors on dealing with investment advisers?
Investors should pay advisers only through banking channels and keep the receipts. SEBI also warns investors never to share passwords and to avoid anyone promising assured returns. Remember: Pay advisers only through banking channels and never share passwords.
Hint Common mistake: Trusting promises of assured returns.
X-A-259Practice bank se · 5
Before engaging an investment adviser, how should an investor check that the adviser is genuine?
The investor should confirm the registration on SEBI's website. The official register is the only reliable check that an adviser is registered. Remember: Always verify an adviser's registration on SEBI's website.
Hint Common mistake: Judging an adviser by popularity instead of registration.
X-A-260Practice bank se · 6
An adviser's yearly compliance audit finds that several clients' risk profiles were incomplete. What is the right response?
The adviser fixes the gaps and reviews the advice built on the weak profiles. An audit observation calls for corrective action, and advice may need to change once profiles are complete. Remember: Audit findings need corrective action, including a review of advice built on the flawed records.
Hint Common mistake: Treating an audit observation as a formality.
X-A-261Practice bank se · 7
An adviser often tells clients to switch funds, though the switches add costs and do not improve their plans. What is the ethical problem?
Needless switching serves activity, not the client. Each switch adds cost without improving the plan, so the advice fails the client's interest. Remember: Advice must benefit the client, not just create activity.
Hint Common mistake: Judging a recommendation only by whether it is legal.
X-A-262Practice bank se · 8
A journalist asks an adviser which well-known investors are clients. What should the adviser do?
The adviser declines. Client information is confidential unless the client agrees or the law requires disclosure. Remember: Client information stays confidential unless the client agrees or the law requires disclosure.
Hint Common mistake: Assuming famous clients' details are public.
X-A-263Practice bank se · 9
An adviser charges much more to a client who seems less financially aware, for the same service others get. Which principle is broken?
Charging a less aware client more for the same service breaks fairness. SEBI's code of conduct for advisers requires fair and reasonable fees. Remember: Fees must be fair and reasonable, never set by how much a client knows.
Hint Common mistake: Treating fees as a purely private bargain.
X-A-264Practice bank se · 10
In the United States, which law governs investment advisers and underpins their fiduciary duty?
US investment advisers are governed by the Investment Advisers Act of 1940, administered by the SEC. Their fiduciary duty includes a duty of care and a duty of loyalty. Remember: US advisers are governed by the Investment Advisers Act of 1940, which carries a fiduciary duty.
Hint Common mistake: Confusing the Advisers Act with laws for brokers or companies.
X-A-265Practice bank se · 11
Under Australia's financial advice rules, how must an adviser act when giving personal advice to a retail client?
Australian advisers must act in the client's best interests and put the client's interests ahead of their own. This best interests duty is part of Australia's financial advice law. Remember: Australia's rules impose a best interests duty that puts the client first.
Hint Common mistake: Thinking advisers only need to avoid false statements.
X-A-266Practice bank se · 12
Which statement best describes ethics in financial advice?
Ethics means doing what is right for the client, beyond the bare legal minimum. Rules set a floor, and ethics guides choices the rules do not cover. Remember: Ethics goes beyond legal minimums to doing right by the client.
Hint Common mistake: Equating ethics with bare legal compliance.
X-A-267Practice bank se · 13
A fund house offers an adviser an expensive holiday after the adviser's clients invest heavily in its schemes. What should the adviser do?
The adviser should decline the holiday. A benefit from a product provider can bias advice, and advisers may not receive consideration linked to their clients' products. Remember: Benefits from product providers can bias advice and must be refused.
Hint Common mistake: Thinking a non-cash benefit is not a conflict.
X-A-268Practice bank se · 14
An elderly client's son asks the adviser to move her savings into a risky business he runs. She seems unsure. What should the adviser do?
The adviser speaks with the client directly and advises on her own needs. A relative's pressure does not change whom the adviser serves. Remember: Advice is for the client's own needs, even when relatives push otherwise.
Hint Common mistake: Taking instructions from a relative instead of the client.
X-A-269Practice bank se · 15
An adviser's profile calls him a 'SEBI-approved expert with guaranteed returns'. What is wrong with this?
Registration does not mean SEBI approves the adviser, and returns cannot be guaranteed. Claims like these mislead investors. Remember: Registration is not approval, and no adviser may promise assured returns.
Hint Common mistake: Treating registration as a stamp of guaranteed quality.
X-A-270