Question

An IA amends its standard investment advisory contract to require mandatory mediation in the event of a dispute between the IA and the client(s). This amendment is:

[A] allowed so long as the return to the client was disclosed.

[B] allowed because the Treasury guarantees the coupon payment.

[C] not allowed because IA's cannot guarantee specific returns.

[D] not allowed because it is possible for the client to sell the security before maturity.

Answer 1

Answer: [D] not allowed because it is possible for the client to sell the security before maturity.

Explanation:

An IA cannot require a client to waive any right available under state or federal law. This makes it not allowed due to it is possible for the client to sell the security before maturity.