An investment intermediary CANNOT provide investment advice on which of the following?

• A. Contracts for Difference.
• B. Bonds listed on a Stock Exchange.
• C. Non-insurance tracker bonds.
• D. Collective investment funds.

Answer: (A)

The thing being tested is that not all financial products fall under someone’s ability to give personalized investment advice. Bonds listed on a stock exchange, non-insurance tracker bonds, and collective investment funds are standard regulated investment products, so an adviser can assess a client’s goals and risk tolerance and tailor recommendations for them.

Contracts for Difference are derivatives designed mainly for short-term speculation and leverage. They don’t involve owning the underlying asset and carry high complexity and risk, which regulators typically treat as outside the scope of routine investment advice. Because of that, an investment intermediary is generally restricted from giving personalized investment advice on CFDs; the appropriate approach is to provide information about the product and its risks or offer execution-only services.

So, the reason the choice about CFDs is the one that cannot be advised on is that CFDs are a high-risk derivative product subject to stricter guidance on when and how advice can be given, unlike the other listed investment products.