Why Would a Broker Whom Is Engaged in Churning Be

question 24

Multiple Choice

Why would a broker whom is engaged in churning be at a conflict of interest with their client?

• A) Investing in risky securities is counter to the interest of a risk averse investor.
• B) The broker is trading to generate income for themselves and not returns for the investor.
• C) The broker isn't performing the due diligence necessary to provide accurate advice.
• D) The broker knows that the client has signed an agency contract agreeing not to sue.
• E) The broker is required to inform the client before buying securities created by their firm.

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Definitions:

Economic Determinism

The theory that economic forces and material interests shape societal structures, values, and practices.

Scientific Method

A systematic procedure for collecting and analyzing evidence crucial in the advancement of science, involving observation, hypothesis formulation, experimentation, and conclusion.

Positivism

A philosophical system recognizing only that which can be scientifically verified or which is capable of logical or mathematical proof, thus rejecting metaphysics and theism.

World-Systems Theory

World-Systems Theory is a sociological perspective that analyzes societies in terms of the global economic system, focusing on the hierarchy of countries as core, semi-periphery, and periphery.