Accredited Wealth Management Advisor Practice Exam

Which of the following is NOT a change resulting from investment firms transitioning to publicly traded companies?

1. Partners share profits and losses equally.

2. Profits are privatized while losses are socialized.

3. There is a decrease in individual accountability.

4. Risk-taking has increased.

The correct answer is: There is a decrease in individual accountability.

The assertion that there is a decrease in individual accountability resulting from investment firms transitioning to publicly traded companies is accurate for the context of the question. When firms become publicly traded, they are often subject to stricter regulations and compliance requirements, which can lead to increased oversight and transparency. This can translate to individual accountability being heightened because employees and executives must meet specific performance metrics and regulatory standards, ultimately holding individuals more responsible for their actions. In contrast, the other options reflect changes that can occur when investment firms become publicly traded. For example, the alteration in profit-sharing dynamics can lead to profits being distributed among numerous shareholders rather than being exclusively shared among partners. The notion that profits are privatized while losses are socialized describes a scenario where shareholders benefit from public ownership, yet the risks can disproportionately fall on the public or the stakeholders, such as in the case of bailouts. Finally, the idea that risk-taking has increased aligns with the incentive structures often found in publicly traded companies, where executives may prioritize short-term gains to boost stock prices, potentially leading to more aggressive risk-taking behaviors. Therefore, option C accurately reflects a condition that is not typically a result of this transition.