What aspect of the brokerage firm operational model can benefit the br

QUESTION

What aspect of the brokerage firm operational model can benefit the broker at the expense of the client?

A) Brokers can execute limit sell orders at higher than the stipulated order price and keep the difference.
B) Brokers can utilize insider trading knowledge to manipulate client trades for their own benefit.
C) Brokers can earn extra commissions by recommending clients make unnecessary transactions.
D) Brokers can avoid sending prospectuses for buy-and-hold stocks that would limit their transaction commissions.
E) Brokers can upsell clients for expensive secondary services such as tax advice.

ANSWER

Answer: C
Explanation: C) Under a brokerage firm model, brokers earn commissions on the transactions they execute. To earn more commissions, brokers may recommend that clients buy or sell stocks when market conditions would not support this strategy.