NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesMedium
An investment adviser representative (IAR) for a state-registered IA has been managing a client's portfolio for five years. The client, Mr. Davies, recently passed away. According to the Uniform Securities Act (USA), which of the following best describes the IAR's immediate obligation regarding Mr. Davies' account?
- ALiquidate all assets in the account to prevent further market fluctuations and hold the cash.
- BContinue managing the account as per the existing investment policy statement until contacted by the estate.
- CTransfer the account assets to the designated beneficiaries as per the last will and testament.
- DImmediately freeze the account and await instructions from the executor of the estate or legal representative.
Show answer & explanationAnswer & explanation
Correct answer: D. Immediately freeze the account and await instructions from the executor of the estate or legal representative.
Upon notification of a client's death, the IAR's authority to act on behalf of the client ceases. The IAR must immediately freeze the account to prevent any unauthorized activity and await formal instructions from the legally appointed representative of the estate (e.g., executor or administrator).
Why the other options are wrong
- A. Liquidating assets without authorization from the estate's legal representative is an unauthorized and potentially harmful action.
- B. The IAR's authority ends with the client's death; managing the account without new authorization is prohibited.
- C. The IAR cannot transfer assets without proper legal documentation and instructions from the estate's representative.
Client Death Protocol (USA)
Upon notification of a client's death, an IAR's authority over the account ceases, and the account must be frozen, awaiting instructions from the legal representative of the estate.
- IAR's authority terminates immediately.
- Account must be frozen.
- Await instructions from executor/legal representative.
Memory trick: Death means stop, freeze, then await the estate's call.