An adviser may sell securities to its clients from its own proprietary account with consent of the client before completion of the trade. This is allowed under what condition?

• A. With client consent before the trade
• B. Only after the trade
• C. Not allowed in any case
• D. Only with regulatory approval

Answer: (A)

Cross-trades between an adviser’s own account and a client’s account are allowed only when the client has given consent before the trade. This pre-trade consent protects the client from hidden conflicts of interest, ensures the client agrees to the terms and price, and helps verify that the transaction is fair and properly disclosed. If consent were required only after the trade, or if no consent were possible, the arrangement could be unfair or undisclosed. Regulatory approval alone is not the standard requirement for this scenario; the key is the client’s prior approval.