NASAA Series 63Ethical Practices and ObligationsMedium
A client sends an email to their agent requesting that all shares of a specific technology stock be sold immediately. The agent, being out of the office for the day without access to the firm's trading system, forwards the email to a colleague and asks them to execute the trade. The colleague forgets to place the order, and the stock drops significantly the next day. The agent is ultimately responsible for the client's request because:
- AThe client's email did not constitute a valid order.
- BThe agent failed to obtain written discretionary authority.
- CAgents are responsible for fulfilling client orders promptly and accurately.
- DThe agent did not personally execute the trade.
Show answer & explanationAnswer & explanation
Correct answer: C. Agents are responsible for fulfilling client orders promptly and accurately.
Agents have a fundamental ethical and regulatory obligation to ensure that client orders are executed promptly and accurately. Delegating the task does not absolve the original agent of responsibility for ensuring the order is fulfilled, especially when the client suffers a loss due to the delay.
Why the other options are wrong
- A. A client's email can constitute a valid order, especially if the firm allows electronic communication for such purposes and the intent is clear.
- B. Discretionary authority is for making trade decisions, not for executing specific client-directed orders. This order was client-directed.
- D. While the agent didn't personally execute, the responsibility lies in ensuring the order's execution, not necessarily performing it themselves.
Client Order Execution
Agents are responsible for ensuring client orders are executed promptly, accurately, and in the client's best interest.
- Delegation does not transfer ultimate responsibility.
- Delays leading to client loss can result in liability.
- Orders must be handled according to firm procedures and regulatory requirements.
Memory trick: Client orders are paramount, like a ticking clock.