New England Securities Regulation Institute: ALI-ABA Course of Study Materials V. Supplement

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Supplement New England Securities Regulation Institute: ALI-ABA Course of Study Materials 1 (1986)

handle is hein.ali/nesecin0002 and id is 1 raw text is:

FACT PATTERN FOR SECURITIES PANEL DISCUSSION

Mr. and Mrs. Smith are referred to a broker by

friends. The Smiths are told by their friends that the

broker--Walter Jones--had made them a lot of money over the

past year and that they hadn't had to do anything except sign

some forms when they opened their account.

The Smiths met Jones at his brokerage firm's office.

According to the Smiths, Jones told them he could do as well

for the Smiths as he had for their friends. He asked them a

few questions about their income, net worth and cash flow

needs. Regarding investment objectives and investment

strategy, the Smiths say they told Jones that they had $200,000

to invest, needed income of $1,000-2,000 a month from the

account, and would need an additional $20,000 a year five years

hence when their daughter started college. The Smiths say that

Jones said that because of their high income requirements,

covered call options and bonds would be appropriate. They said

he should do whatever he thought best, since he was the

professional.

The $200,000 to invest had been inherited by Mrs.

Smith, and accordingly they wished the account to be in her