I think this question is written incorrectly 7H8QC-XFHFY.
Based on the answer, the question should be stated opposite as written.
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Hi @April! Thanks for reaching out.
I believe you’re referencing this question (or at least one that’s similar):
The answer is correct. To be clear, it’s asking what trade would NOT be prohibited in a custodial account. While leveraged and inverse ETFs are considered risky investments, they are technically allowed in these types of accounts. Generally speaking, fiduciary accounts (e.g. custodial accounts) are prohibited from:
- Short uncovered options
- Utilizing margin
- Short selling securities
While prudent investor standards require fiduciaries to avoid significant investments in risky securities like leveraged and inverse ETFs, it could be argued they are suitable if comprising a small portion of the account.
Bottom line - this question is correct. I hope the additional context helps. Please let me know if you have any additional questions.
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