FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationProfessional Conduct and Ethical ConsiderationsMedium
A registered representative is approached by a client who expresses concern that their investment account statements do not accurately reflect recent transactions they believe they made. The client suspects potential unauthorized activity. What is the representative's immediate and most appropriate action?
- AReassure the client that the firm's systems are secure and errors are unlikely.
- BProvide the client with a detailed printout of all account activity for the past six months.
- CImmediately escalate the client's concern to their supervisor and the firm's compliance department.
- DReview the client's recent trade confirmations to clarify the transactions.
Show answer & explanationAnswer & explanation
Correct answer: C. Immediately escalate the client's concern to their supervisor and the firm's compliance department.
Any suspicion of unauthorized activity or fraud must be immediately escalated to supervisory and compliance personnel. This ensures a prompt and thorough investigation, protecting the client, the representative, and the firm from potential harm and regulatory violations.
Why the other options are wrong
- A. Dismissing a client's concern without investigation is unprofessional and potentially negligent.
- B. Providing a printout doesn't address the core concern of unauthorized activity and doesn't initiate the necessary internal investigation.
- D. While reviewing confirmations is part of the process, the immediate and primary action for suspected unauthorized activity is escalation, not self-investigation.
Unauthorized Activity Reporting
Any suspicion or allegation of unauthorized trading, fraud, or other illicit activity must be immediately reported to a supervisor and compliance department for investigation.
- Representatives cannot investigate such claims independently.
- Prompt reporting is crucial to mitigate harm and ensure regulatory compliance.
- Firm's compliance department has specialized procedures for such scenarios.
Memory trick: Fraud's a red flag, don't delay the alert; tell your boss and compliance, for client's sake, don't hurt.