fb-regbi-0003
{
"customer": "Retail customer with a documented moderate-growth profile and a buy-and-hold orientation.",
"recommendation_pattern": "Over eleven months, the associated person recommended 38 buy-and-sell round trips in the account.",
"stipulated_facts": [
"Each individual trade, viewed alone, matched the customer's profile and was reasonably researched.",
"The recommended pattern produced an annualized cost-to-equity ratio of 21% and portfolio turnover of 12.",
"The associated person's compensation increased with each trade.",
"All written disclosures were provided."
]
}Judged only against the obligations quoted in this item's sources, which conclusion follows about this pattern of recommendations? Answer with exactly one option id.
consistent— The series is consistent with the quoted obligationsviolates-care-series— It violates the care obligation's series-of-transactions prong (excessive when taken together)violates-care-reasonable-basis— It violates the care obligation's reasonable-basis prongviolates-disclosure— It violates the disclosure obligation
violates-care-series
The quoted prong addresses exactly this pattern: a series of recommended transactions, even if each is in the customer's best interest viewed in isolation, must not be excessive taken together in light of the customer's profile. A 21% annualized cost-to-equity ratio and turnover of 12 recommended into a moderate buy-and-hold profile, while the broker's compensation rose with each trade, is the excessive series the text prohibits — the per-trade defensibility the facts stipulate is precisely what the prong says does not save the series.
Selects violates-care-series; recognizes that per-trade defensibility does not cure an excessive series.
“series of recommended transactions, even if in the retail customer's best interest when viewed in isolation, is not excessive and is in the retail customer's best interest when taken together in light of the retail customer's investment profile”
Each quoted passage is exact-matched, after typographic normalization, against the corpus text fetched from the issuing authority (hashes in the corpus manifest). An item whose quote stops matching fails the build.
“series of recommended transactions, even if in the retail customer's best interest when viewed in isolation, is not excessive and is in the retail customer's best interest when taken together in light of the retail customer's investment profile” — sec-regbi
The key correctly identifies that the scenario violates the care obligation's series-of-transactions prong. The facts stipulate a pattern of 38 round trips over 11 months with a 21% cost-to-equity ratio and turnover of 12 for a buy-and-hold customer, which constitutes an excessive series of transactions despite each trade being suitable in isolation.
“Have a reasonable basis to believe that a series of recommended transactions, even if in the retail customer's best interest when viewed in isolation, is not excessive and is in the retail customer's best interest when taken together in light of the retail customer's investment profile and does not place the financial or other interest of the broker, dealer, or such natural person making the series of recommendations ahead of the interest of the retail customer.” — sec-regbi
The quoted prong directly addresses the scenario: 38 round trips, 21% annualized cost-to-equity, turnover of 12, a moderate buy-and-hold profile, and compensation increasing with each trade support the conclusion that the series is excessive taken together, even if each trade was suitable in isolation. The key correctly identifies the care obligation's series-of-transactions prong.
v1; no errata. Demonstrate a key error and the correction is published here, credited — challenge policy.