NASAA Series 63Ethical Practices and ObligationsEasy
An investment adviser representative (IAR) maintains several client files, some of which contain sensitive personal information like Social Security numbers and bank account details. The IAR stores these files on a personal laptop that is not encrypted and is often left unattended in public spaces. This practice most directly violates which ethical obligation?
- AThe duty to avoid churning client accounts.
- BThe duty to ensure client data security.
- CThe duty to disclose conflicts of interest.
- DThe duty to maintain adequate books and records.
Show answer & explanationAnswer & explanation
Correct answer: B. The duty to ensure client data security.
Leaving unencrypted sensitive client data on an unattended laptop in public spaces directly compromises client data security, which is a fundamental ethical and regulatory obligation.
Why the other options are wrong
- A. Churning involves excessive trading for commissions, which is not described here.
- C. This scenario does not describe a conflict of interest.
- D. While records must be maintained, the issue here is the security of those records, not their existence.
Client Data Security
Investment professionals have an ethical and regulatory obligation to protect client personal and financial information from unauthorized access, use, or disclosure.
- Includes physical and digital security measures.
- Encryption is a common security practice.
- Breaches can lead to significant penalties and client harm.
Memory trick: Secure data, secure trust.