NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesHard
An Investment Adviser Representative (IAR) for a state-registered IA has been managing a client's account for several years. Upon learning of the client's death, the IAR receives instructions from the client's adult child, who presents a copy of the will indicating they are the sole beneficiary and executor of the estate, to immediately liquidate a significant portion of the portfolio. What is the IAR's most appropriate initial action?
- AVerify the legal authority of the executor by requesting certified copies of the death certificate and letters testamentary.
- BInform the client's attorney of record about the death and await their instructions regarding the estate.
- CProceed with the liquidation as instructed by the named executor, as they have legal authority.
- DPlace a temporary freeze on the account until all estate matters are legally resolved, without taking any action.
Show answer & explanationAnswer & explanation
Correct answer: A. Verify the legal authority of the executor by requesting certified copies of the death certificate and letters testamentary.
Upon a client's death, an IAR must verify the legal authority of anyone claiming to act on behalf of the estate. A copy of a will is insufficient; certified legal documents like a death certificate and letters testamentary are required to confirm executorship.
Why the other options are wrong
- B. While informing the attorney may be a later step, the immediate priority is to verify the executor's legal standing before acting on instructions.
- C. Acting on a copy of a will without certified documentation can expose the IAR and firm to significant liability.
- D. A freeze might occur, but the initial, proactive step is to request and verify documentation to prevent unauthorized actions.
Client Death Protocol (IAR)
The procedure an IAR must follow upon a client's death to ensure proper handling of the account and transfer of assets.
- Requires verification of executor's legal authority.
- Mandates obtaining certified legal documents (death certificate, letters testamentary).
- Prevents unauthorized access or disposition of assets.
Memory trick: When a client's account goes quiet, verify the new voice with official papers.