Having some clients who are less knowledgeable about investing and seem to be more trusting of their firm, the management of a financial advising organization has decided to use cash from newer investors to pay off older ones. The actions of management are an example of

a. a code of conduct.

b. a Ponzi scheme.

c. a JIT system.

d. a business plan.

e. insider trading.

Question

Business

Ricardo Hansen

10 November, 01:08

Having some clients who are less knowledgeable about investing and seem to be more trusting of their firm, the management of a financial advising organization has decided to use cash from newer investors to pay off older ones. The actions of management are an example of

a. a code of conduct.

b. a Ponzi scheme.

c. a JIT system.

d. a business plan.

e. insider trading.

+2

Answers (1)

Know the Answer?

Dylan Fernandez · Answer 1

b. a Ponzi scheme.

Explanation:

Ponzi scheme -

It is basically a fraud investing scheme, which promise very high return rates with very less risk to the investors.

This scheme generates returns for the early investor by enabling new fresh investors.

People, who need money, generally take this path way, and lose even the amount with them.

This scheme is same as the pyramid scheme.

The two scheme is based on paying the earlier backers by the new investors.

Hence, from the question information, the given example is of a a Ponzi scheme.