A registered dealing representative, Sarah, discovers that her client, Mr. Henderson, a 75-year-old widower, has significant assets but limited investment experience. Mr. Henderson expresses a strong desire for capital preservation but is considering investing a substantial portion of his portfolio into a single speculative junior mining stock based on a tip from a friend. What is Sarah's primary obligation under NI 31-103 regarding this situation?

Question: A registered dealing representative, Sarah, discovers that her client, Mr. Henderson, a 75-year-old widower, has significant assets but limited investment experience. Mr. Henderson expresses a strong desire for capital preservation but is considering investing a substantial portion of his portfolio into a single speculative junior mining stock based on a tip from a friend. What is Sarah's primary obligation under NI 31-103 regarding this situation?

Answer options: ✅ To ensure the investment is suitable for Mr. Henderson's risk tolerance and objectives, even if it means advising against his preferred choice.

• To execute the trade as requested by Mr. Henderson, as he is the ultimate decision-maker for his own investments.
• To inform Mr. Henderson about the risks but proceed with the trade if he insists, documenting his acknowledgment.
• To report Mr. Henderson's investment intentions to a senior manager for intervention.

Correct answer: To ensure the investment is suitable for Mr. Henderson's risk tolerance and objectives, even if it means advising against his preferred choice.

Explanation: NI 31-103 mandates that a registered firm and its registered individuals must take reasonable steps to ensure that any investment action they recommend or decide on for a client is suitable for the client. This obligation overrides a client's specific request if the investment is unsuitable.