An advisor manages a "moderate risk" portfolio for a retail client. Over the past three years, the portfolio's technology holdings have generated massive returns, causing the sector to heavily dominate the account. The client reviews their statements regularly, is thrilled with the performance, and has not asked for any changes. The advisor decides no action is necessary. What is the primary regulatory failure in the advisor's approach?

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Accepted Answer

Correct. The content emphasizes that client silence does not relieve the registrant of their suitability obligation. The advisor must proactively address the new concentration risk and determine if the client's actual risk capacity supports it, or if rebalancing is required.

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