Which duty of securities dealers relating to clients requires informing clients of risks?

• A. Duty of diligence
• B. Prohibition of front-running
• C. Chronological execution
• D. Duty of disclosure

Answer: (D)

The duty of disclosure is the obligation to inform clients of risks. When a securities dealer discusses an investment or makes a recommendation, they must reveal material risk factors, potential losses, volatility, liquidity, fees, and any conflicts of interest that could affect the decision. This ensures the client can assess whether the investment fits their risk tolerance and objectives, providing informed consent. The other duties relate to different obligations: diligence concerns the care and competence applied in handling the client’s affairs; front-running prohibits trading on the basis of advance knowledge of a client’s orders; and “chronological execution” isn’t a standard duty in this context. So, disclosure is the duty that specifically requires informing clients about risks.