Question

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.

Answer 1

b. a Ponzi scheme.

Step-by-step 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 .