Financial Industry Regulatory Authority (FINRA) Practice Exam

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What would be considered a recommendation to a client?

  1. Discussing the pros and cons of various account types

  2. Discussing the advantages of your firm over competitors

  3. Discussing day trading advantages with an existing client

  4. Discussing non-investment product pros and cons

The correct answer is: Discussing day trading advantages with an existing client

A recommendation to a client typically involves suggesting specific actions that a client should take concerning their investment strategy or trading activities. In this context, discussing day trading advantages with an existing client directly pertains to the client's investment strategy and implies a suggestion for the client to consider day trading as a viable option for their investment approach. This discussion is tailored to the client's financial situation and investment profile, which solidifies the aspect of making a personalized recommendation. In contrast, discussing the pros and cons of account types involves providing general information that may not necessarily direct the client toward a specific investment decision or strategy. Similarly, promoting the advantages of your firm over competitors leans more toward marketing rather than providing a tailored investment recommendation. Lastly, discussing the pros and cons of non-investment products does not pertain to investment strategies and therefore lacks the relevancy required to be classified as a specific recommendation in the investment context.