If a client could prove the firm marketed its code of ethics as putting clients first and the adviser violated that code, what could be the outcome?

If a client could prove the firm marketed its code of ethics as putting clients first and the adviser violated that code, what could be the outcome?

• A. No consequence
• B. Regulatory penalties
• C. Client may win
• D. No effect

Answer: (C)

Marketing the code of ethics as putting clients first is a promise about how the firm will act. If an adviser violates that promise, the client can argue that the firm misrepresented its standards and breached its duty to act in the client’s best interests. When a client can prove that reliance on the marketing statement occurred and a violation happened, a civil claim for damages or other remedies can be pursued, making it possible for the client to win. While regulatory penalties could also arise in such cases, the direct and most straightforward outcome highlighted here is that the client may win.

Marketing the code of ethics as putting clients first is a promise about how the firm will act. If an adviser violates that promise, the client can argue that the firm misrepresented its standards and breached its duty to act in the client’s best interests. When a client can prove that reliance on the marketing statement occurred and a violation happened, a civil claim for damages or other remedies can be pursued, making it possible for the client to win. While regulatory penalties could also arise in such cases, the direct and most straightforward outcome highlighted here is that the client may win.