FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationProfessional Conduct and Ethical ConsiderationsMedium
A registered representative (RR) receives an email from a client requesting a significant withdrawal from their investment account to purchase a luxury item. The email contains grammatical errors and a sense of urgency that is uncharacteristic of the client. The client's usual email address also appears slightly off. What should the RR do FIRST?
- AForward the email to the firm's compliance department and wait for their instructions.
- BProcess the withdrawal immediately to meet the client's urgent request.
- CReply to the email requesting clarification and additional security information.
- DContact the client directly via a previously established, trusted phone number or another verified channel.
Show answer & explanationAnswer & explanation
Correct answer: D. Contact the client directly via a previously established, trusted phone number or another verified channel.
The red flags (grammatical errors, urgency, suspicious email address) strongly suggest a potential phishing attempt or fraudulent activity. The RR's first priority is to verify the client's identity and the legitimacy of the request using a trusted, out-of-band communication method, such as a verified phone number, before taking any action on the request or involving compliance.
Why the other options are wrong
- A. While informing compliance is important, the immediate action is to prevent potential fraud by verifying the request with the client directly.
- B. Processing an unverified request could lead to significant financial loss for the client due to fraud.
- C. Replying to a potentially fraudulent email could inadvertently confirm its validity or provide more information to the fraudster.
Client Request Verification
The process of confirming the authenticity of a client's request, especially for significant transactions or changes, using a trusted, independent communication method when red flags are present.
- Essential for preventing fraud and identity theft.
- Use verified contact information (e.g., phone number on file).
- Do not rely solely on the communication channel of the suspicious request.
Memory trick: When in doubt, call them out!