Discuss Finra Series-63 Exam Topic 8 Question 18

In which of the following scenarios will the investment adviser be subject to criminal fraud charges?

AAn adviser owns the stock of TweedleDee Corporation and has issued a report recommending the stock as a ''buy'' without disclosing the fact that it owns the stock.

BAn adviser owns the stock of TweedleDee Corporation and has issued a report recommending the stock as a ''buy,'' disclosing the fact that it owns the stock

CAn adviser sells its shares of TweedleDee Corporation after issuing a report recommending the stock as a ''buy.''

Dall of the above. It is considered criminal fraud for an investment adviser to make any recommendations on a security in which it has or plans to have a position.

Suggested Answer: C

An adviser that sells its shares of TweedleDee Corporation after issuing a report recommending the stock as a ''buy'' is subject to criminal fraud charges for willfully deceiving its clients.

The adviser who recommends the stock as a buy without disclosing the fact that it owns the stock is engaging in a prohibited activity for non-disclosure, but would be unlikely to face criminal fraud charges.

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28 comments · newest first

Jesusita 4 months ago

B) is fine. Disclosure protects the adviser from fraud charges.

Bok 6 months ago

C) is tricky. Selling after a buy recommendation feels wrong.

Trina 6 months ago

I think D) makes sense. Advisers should be transparent always.

Kris 6 months ago

A) is definitely fraud. No disclosure is a big deal.

Tish 6 months ago

D) sounds too broad, not all cases are fraud.

Mona 7 months ago

Wait, all of them? That sounds extreme!

Bulah 7 months ago

C) seems sketchy too, but not sure it's fraud.

Elinore 7 months ago

I disagree, B) is fine since they disclosed it.

Patrick 7 months ago

A) is definitely fraud if they don't disclose ownership.

Curt 7 months ago

Haha, trick question! The answer is clearly D. Advisers are crooks, every last one of them.

Lorriane 7 months ago

Hmm, this is tricky. I'll go with B - disclosure is key.

Vicki 8 months ago

D is the answer. Advisers can't recommend anything they have a stake in, period.

Mendy 8 months ago

This question is a real head-scratcher. I'm going to go with C - selling after a recommendation is shady.

Lashawn 8 months ago

B is the correct choice. As long as the ownership is disclosed, it's not considered fraud.

Lavina 9 months ago

D is the right answer. Investment advisers must disclose any positions they have in securities they recommend.

Aracelis 9 months ago

A is the correct answer. Failing to disclose a conflict of interest is considered fraud.

Viola 9 months ago

I feel like D might be too broad. Just because an adviser has a position doesn't automatically mean they're committing fraud, right? It depends on the disclosure.

Brittni 9 months ago

I remember a practice question that was similar to this, and it emphasized the importance of disclosure. So, I think A is the right answer, but I’m not confident about the others.

Ciara 9 months ago

I'm not entirely sure about option C. Selling shares after a recommendation feels sketchy, but does it really count as fraud if they disclosed it?

Juan 9 months ago

I think option A could definitely lead to criminal fraud since the adviser didn't disclose their ownership. It seems like a clear conflict of interest.

Annmarie 10 months ago

I'm a bit confused on this one. The wording of the question is tripping me up. I think I need to re-read it a few times and really think through the different scenarios to figure out the right answer.

Kimberlie 10 months ago

I'm pretty confident that the answer is D. Any recommendations on a security where the adviser has a position, whether disclosed or not, is considered criminal fraud. Gotta be super careful about conflicts of interest in this field.

Theron 10 months ago

Okay, let me see if I can break this down. If the adviser disclosed their ownership, then that seems like it would be okay, right? But if they didn't disclose it, then that's a problem. I'm leaning towards A or D as the correct answer.

Pete 10 months ago

Hmm, I'm not sure. I think it might depend on the specific laws and regulations around investment advisers and disclosures. I'll need to think this through carefully.

Blondell 10 months ago

I think the key here is whether the adviser disclosed their ownership of the stock. If they didn't disclose it, then that seems like fraud to me.

Danilo 4 months ago

↳ replying to Blondell

So, option A seems like the clear choice for fraud.

Coleen 4 months ago

↳ replying to Blondell

Definitely! Transparency is crucial in these cases.

Kristin 4 months ago

↳ replying to Blondell

I agree, not disclosing ownership is a big red flag.

Finra Series-63 Exam - Topic 8 Question 18 Discussion