Newbie is a newly-minted registered representative. Mr. Oldman saunters into her office, becomes infatuated with her, opens an account, and signs a document giving Ms. Newbie discretionary authority over the account. Mr. Oldman is 68 years old, retired, lives on a fixed income, and pays taxes at the lowest marginal tax rate available. His stated investment objectives are capital preservation and income. Ms. Newbie invests ¼ of his investment monies in a periodic-payment, deferred, variable annuity. Based on these facts:

Question

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If Ms. Newbie invests ¼ of Mr. Oldman's investment monies in a periodic payment, deferred, variable annuity, given his age and his investment objectives, she may lose her license before she gets started in the business for making an unauthorized transaction. Even though she has discretionary authority over the account, she must still ensure she selects investments that are suitable for her client. A deferred, variable annuity clearly does not match Mr. Oldman's investment objectives. The value of the contract fluctuates, for one thing, and for another, there will be no income from it initially since it is a deferred annuity, and it probably has a surrender charge as well.

Newbie Is a Newly-Minted Registered Representative