Laurna Hired Ned to Act as Her Stockbroker

question 64

Multiple Choice

Laurna hired Ned to act as her stockbroker.Ned purchased certain stocks on Laurna's behalf and at her specific direction.Ned advised her not to buy them, saying that they were too risky, but she insisted.Because those stocks subsequently dropped in value, Laurna has sued Ned for compensation.Which of the following is TRUE?

• A)Ned may be held liable for breach of fiduciary duty because it is his job to prevent her from making mistakes.
• B)Ned may be held liable for breach of fiduciary duty because he did not act in Laurna's best interests.
• C)Ned is not liable for breach of fiduciary duty even though buying the stocks was not in Laurna's best interests because he acted on her direct instructions.
• D)Ned is not liable for breach of fiduciary duty because everyone knows that stocks can fall in value.
• E)Ned is not liable because stock brokers are governed by a licensing scheme.

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Definitions:

Salience Effect

Refers to the tendency of individuals to focus on items or information that stand out more noticeably or are more significant to them.

Depth of Processing

A theory suggesting the depth (shallow to deep) of mental processing affects memory recall; deeper processing leads to better recall.

Retroactive Interference

The phenomenon where newly learned information interferes with the recall of information learned previously.

Proactive Interference

The phenomenon where old memories interfere with the recall of new memories.