Mr. Cross wanders into your office with a $35,000 check that he has received from his recently-deceased wife's insurance company and wants you to advise him how to invest it, since that is your job, as he puts it.
You ask him to fill out a standard investor profile questionnaire, but he refuses to do so. You offer to fill it out for him, based on his answers to your verbal questions, but he still refuses and calls you a "nibby-nose." Based on this, you can:
- allocate the $35,000 any way you choose since you have an uncooperative client.
- advise him to invest the money in a money market mutual fund instead of holding it as cash.
- advise him to invest the money in an S&P 500 Index fund.
- The advice provided in either Choice B or Choice C would be appropriate.
Answer(s): B
Explanation:
If you cannot get any personal information from a client, you cannot legitimately recommend (or execute) an asset allocation for him. You can advise him to invest the money in a money market mutual fund instead of holding it as cash since this will provide him with a small return on his money. You cannot advise him to invest the money in an S&P 500 Index fund, which would subject him to more risk. This would be considered an unsuitable recommendation and is in violation of securities' laws.