What does the Model Code recommend regarding the practice of "name switching/substitution"?
A) Dealers may seek a compensation payment in favor of the bank or an adjustment to brokerage bills from the broker for switching names.
B) If requested by a broker to clear a transaction through name switching, a dealer must ensure that such activities have the prior approval of senior management.
C) The practice of name switching/substitution is neither acceptable nor desirable.
D) Name switching/substitution transactions should be executed as promptly as possible not considering credit limits and policy guidelines.

Question

Quizplus · Accepted Answer

The Model Code recommends that if a broker requests to clear a transaction through name switching, the dealer must ensure that such activities have the prior approval of senior management. The practice of name switching/substitution is not considered acceptable or desirable, so the recommended course of action is to ensure that all necessary approvals are obtained. Option A is incorrect as the Model Code does not provide for dealers seeking compensation payments from banks or adjustments to brokerage bills for name switching. Option C is correct in stating that the practice of name switching/substitution is not considered acceptable or desirable, but does not provide a recommended course of action. Option D is incorrect as it recommends executing name switching/substitution transactions without consideration of credit limits and policy guidelines, which is not recommended by the Model Code.

What Does the Model Code Recommend Regarding the Practice of "Name