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Swagatalaxmi
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Posts: 134
09 May 2024, 10:47
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General Legal Duty: A financial investment firm cannot legally do anything that prevents it from maximizing its clients' returns.
Unintended consequence: Financial investment firms cannot have social, ethical, or environmental initiatives if those initiatives keep the firm from getting the best return for its clients.
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
85%
(hard)
Question Stats:
43% (02:32) correct
57%
(02:42)
wrong
based on 1062
sessions
History
Date
Time
Result
Not Attempted Yet
A news report: After numerous cases where the directors of banks and other financial investment firms were protecting their own personal financial interests at the expense of their investors' financial interests, Mr. Dandilim proposed a new law that would be worded as follows: "All financial services (including retirement funds and bank accounts) that manage investments for clients shall at all times maximize investment returns for those clients." Dandilim said, "The goal of this law is to prohibit firms from charging excessive fees and taking too much of the people's money."
Select for General legal duty the statement that expresses the most complete characterization of the legal duty of financial investment firms with respect to the proposed new law were it implemented using the language above. For Unintended consequence, select a consequence that Dandilim does not identify as a goal in the passage above and that is likely to result if the legal duty selected in the first column were followed. Make only two selections, one in each column.
Select for General legal duty the statement that expresses the most complete characterization of the legal duty of financial investment firms with respect to the proposed new law were it implemented using the language above. For Unintended consequence, select a consequence that Dandilim does not identify as a goal in the passage above and that is likely to result if the legal duty selected in the first column were followed. Make only two selections, one in each column.
| General Legal Duty | Unintended consequence | |
| Financial investment firms will not be able to legally charge excessive fees for investments and savings. | ||
| Financial investment firms will be legally required to operate, for a time, at a budget deficit. | ||
| A financial investment firm is legally required to consider the interest of any person directly affected by its actions. | ||
| A financial investment firm cannot legally do anything that prevents it from maximizing its clients' returns. | ||
| Financial investment firms cannot have social, ethical, or environmental initiatives if those initiatives keep the firm from getting the best return for its clients. |
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Official Answer
General Legal Duty: A financial investment firm cannot legally do anything that prevents it from maximizing its clients' returns.
Unintended consequence: Financial investment firms cannot have social, ethical, or environmental initiatives if those initiatives keep the firm from getting the best return for its clients.
Updated on: 23 May 2024, 17:50
Originally posted by MartyMurray on 09 May 2024, 12:29.
Last edited by MartyMurray on 23 May 2024, 17:50, edited 1 time in total.
Last edited by MartyMurray on 23 May 2024, 17:50, edited 1 time in total.
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A news report: After numerous cases where the directors of banks and other financial investment firms were protecting their own personal financial interests at the expense of their investors' financial interests, Mr. Dandilim proposed a new law that would be worded as follows: "All financial services (including retirement funds and bank accounts) that manage investments for clients shall at all times maximize investment returns for those clients." Dandilim said, "The goal of this law is to prohibit firms from charging excessive fees and taking too much of the people's money."
Select for General legal duty the statement that expresses the most complete characterization of the legal duty of financial investment firms with respect to the proposed new law were it implemented using the language above. For Unintended consequence, select a consequence that Dandilim does not identify as a goal in the passage above and that is likely to result if the legal duty selected in the first column were followed. Make only two selections, one in each column.
The General legal duty must express "the most complete characterization" of the legal duty. So, if it captures just part of that duty but not the entire duty in "general," it won't be correct.
The Unintended consequence could be a variety of things that the law could cause, and the correct answer will likely be a negative or problematic consequence. We're best off just considering each choice rather than seeking to predict what the unintended consequence may be since there are so many possible unintended consequences.
Financial investment firms will not be able to legally charge excessive fees for investments and savings.
This choice presents part of the legal duty of investment firms under the law. However, it doesn't capture the "complete characterization" of their "general" legal duty.
After all, the law is that financial services firms "shall at all times maximize investment returns for ... clients." So, the firms' general legal duty is to do whatever variety of things make sense for maximizing investment returns.
Refraining from charging excessive fees is just one of the things a firm would have to do in order to "maximize investment returns. So, while refraining from charging excessive fees is their legal duty, it is not their "general legal duty," which is much broader than simply refraining from charging excessive fees.
So, this choice is not correct for General legal duty.
It's also not correct for Unintended consequenc since it's an intended consquence of the law.
Eliminate.
Financial investment firms will be legally required to operate, for a time, at a budget deficit.
This choice may present an unintended consequence since, in maximizing returns for clients as prescribed by the law, firms may not be able to charge fees at all and thus may end up operating at budget deficits.
It may not be correct, but we can see whether there's a better choice for Unintended consquence.
Keep for now.
A financial investment firm is legally required to consider the interest of any person directly affected by its actions.
This is not a legal duty or an unintended consequence since the law is specifically about maximizing investment returns for clients, not about the interest of "any person" affected by a firm's actions.
For instance, the law doesn't indicate that a firm would have to consider the interests of the buyer of a security that it sold.
Eliminate.
A financial investment firm cannot legally do anything that prevents it from maximizing its clients' returns.
This choice captures the general legal duty under the law.
After all, what this choice says has basically the same meaning as "All financial services (including retirement funds and bank accounts) that manage investments for clients shall at all times maximize investment returns for those clients."
After all, maximizing "at all times" requires not doing "anything that prevents it from maximizing."
Select for General legal duty.
Financial investment firms cannot have social, ethical, or environmental initiatives if those initiatives keep the firm from getting the best return for its clients.
This choice looks good for Unintended consquence.
After all, it is true that, if firms must "at all times maximize investment returns" for clients, then firms cannnot legally have initiatives that would keep the firms from getting the greatest possible returns for clients.
Also, it makes sense that this consequence would be unintended since it's a negative consequence.
Finally, this choice makes more sense than "Financial investment firms will be legally required to operate, for a time, at a budget deficit," since firms operating at budget deficit would go out of business eventually and thus not get retruns for their clients at all. Also, the goal mentioned in the passage is "to prohibit firms from charging excessive fees and taking too much of the people's money," not to cause investment firms to charge no fees at all and operate at losses.
So, we can eliminate that choice and choose this one.
Select for Unintended consequence.
Correct answer: A financial investment firm cannot legally do anything that prevents it from maximizing its clients' returns., Financial investment firms cannot have social, ethical, or environmental initiatives if those initiatives keep the firm from getting the best return for its clients.
Select for General legal duty the statement that expresses the most complete characterization of the legal duty of financial investment firms with respect to the proposed new law were it implemented using the language above. For Unintended consequence, select a consequence that Dandilim does not identify as a goal in the passage above and that is likely to result if the legal duty selected in the first column were followed. Make only two selections, one in each column.
The General legal duty must express "the most complete characterization" of the legal duty. So, if it captures just part of that duty but not the entire duty in "general," it won't be correct.
The Unintended consequence could be a variety of things that the law could cause, and the correct answer will likely be a negative or problematic consequence. We're best off just considering each choice rather than seeking to predict what the unintended consequence may be since there are so many possible unintended consequences.
Financial investment firms will not be able to legally charge excessive fees for investments and savings.
This choice presents part of the legal duty of investment firms under the law. However, it doesn't capture the "complete characterization" of their "general" legal duty.
After all, the law is that financial services firms "shall at all times maximize investment returns for ... clients." So, the firms' general legal duty is to do whatever variety of things make sense for maximizing investment returns.
Refraining from charging excessive fees is just one of the things a firm would have to do in order to "maximize investment returns. So, while refraining from charging excessive fees is their legal duty, it is not their "general legal duty," which is much broader than simply refraining from charging excessive fees.
So, this choice is not correct for General legal duty.
It's also not correct for Unintended consequenc since it's an intended consquence of the law.
Eliminate.
Financial investment firms will be legally required to operate, for a time, at a budget deficit.
This choice may present an unintended consequence since, in maximizing returns for clients as prescribed by the law, firms may not be able to charge fees at all and thus may end up operating at budget deficits.
It may not be correct, but we can see whether there's a better choice for Unintended consquence.
Keep for now.
A financial investment firm is legally required to consider the interest of any person directly affected by its actions.
This is not a legal duty or an unintended consequence since the law is specifically about maximizing investment returns for clients, not about the interest of "any person" affected by a firm's actions.
For instance, the law doesn't indicate that a firm would have to consider the interests of the buyer of a security that it sold.
Eliminate.
A financial investment firm cannot legally do anything that prevents it from maximizing its clients' returns.
This choice captures the general legal duty under the law.
After all, what this choice says has basically the same meaning as "All financial services (including retirement funds and bank accounts) that manage investments for clients shall at all times maximize investment returns for those clients."
After all, maximizing "at all times" requires not doing "anything that prevents it from maximizing."
Select for General legal duty.
Financial investment firms cannot have social, ethical, or environmental initiatives if those initiatives keep the firm from getting the best return for its clients.
This choice looks good for Unintended consquence.
After all, it is true that, if firms must "at all times maximize investment returns" for clients, then firms cannnot legally have initiatives that would keep the firms from getting the greatest possible returns for clients.
Also, it makes sense that this consequence would be unintended since it's a negative consequence.
Finally, this choice makes more sense than "Financial investment firms will be legally required to operate, for a time, at a budget deficit," since firms operating at budget deficit would go out of business eventually and thus not get retruns for their clients at all. Also, the goal mentioned in the passage is "to prohibit firms from charging excessive fees and taking too much of the people's money," not to cause investment firms to charge no fees at all and operate at losses.
So, we can eliminate that choice and choose this one.
Select for Unintended consequence.
Correct answer: A financial investment firm cannot legally do anything that prevents it from maximizing its clients' returns., Financial investment firms cannot have social, ethical, or environmental initiatives if those initiatives keep the firm from getting the best return for its clients.
General Discussion
23 May 2024, 17:05
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MartyMurray KarishmaB chetan2u
I am still not convinced about the first question.
Why is this option not the answer for general legal duty: Financial investment firms will not be able to legally charge excessive fees for investments and savings."
I am still not convinced about the first question.
Why is this option not the answer for general legal duty: Financial investment firms will not be able to legally charge excessive fees for investments and savings."
MartyMurray
