Which principle relates to the customer relationship of trust and ensures the suitability of advice and discretionary decisions?

• A. Customer relationship of trust: Ensure suitability of its advice and discretionary decisions
• B. Forward exchange rates
• C. Theoretical ex-rights price
• D. Scrip or capitalisation issue

Answer: (A)

The main idea here is the duty to maintain a customer relationship of trust and to ensure that any advice given and any discretionary decisions taken are suitable for the client. This means understanding the client’s financial situation, goals, risk tolerance, knowledge, and time horizon, and making recommendations or acting on their behalf that fit those factors. When a discretionary mandate exists, the firm must operate within that mandate and implement appropriate controls and reviews to keep decisions aligned with the client’s objectives. The other terms relate to separate areas of finance—currency hedging, pricing in a rights issue, and share issuance methods—so they don’t address the trust-based duty to ensure suitability.