Asked by Sydnee Frakes on Jul 26, 2024

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Rose, a financial advisor, recommended that a client, Maureen, purchase shares in Mad Money Mutual Fund. Relying on Rose's recommendation the client purchased 100 units. The entire stock market collapsed, and the value of Mad Money Mutual Fund was reduced significantly. Maureen was surprised to learn that Rose earned a commission on each unit sold to her clients. Is Rose liable to Maureen?

A) No, mutual fund dealers are not liable to their clients for losses incurred.
B) No, Rose met the standards of care for a financial adviser.
C) No, Rose's advice did not cause the loss.
D) Yes, Rose breached her fiduciary duty by not disclosing that she received a commission on sales.
E) Yes, Rose failed to meet the standard of care for a financial adviser by recommending a mutual fund that failed.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another when entrusted with certain responsibilities, typically in financial or property matters.

Financial Adviser

A professional who provides expert advice on financial planning and investment strategies to individuals or businesses.

Standard of Care

A guideline that clinicians are advised to adhere to when diagnosing and treating specific patient types, illnesses, or clinical scenarios.

  • Acquire knowledge on the fundamentals of fiduciary duty and its impact on the dynamics between professionals and their clients.
  • Discover occurrences of professional neglect and judge responsibility in multiple scenarios.
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LB
Lillian BauerJul 28, 2024
Final Answer :
D
Explanation :
Rose breached her fiduciary duty by not disclosing her commission, which is a conflict of interest that should have been transparent to Maureen.