Final answer:
In the context of loans within the financial industry, thorough checks and balances, such as income verification and credit checks, are typically required. Similar ethical standards would apply when a registered person at a broker-dealer intends to lend money to a customer, necessitating firm policies for disclosure and preapproval.
Step-by-step explanation:
The question relates to the regulations concerning loans between a person registered at a broker-dealer and a customer of the broker-dealer, with whom there is an outside business relationship. In the financial capital market, loans come with certain requirements to ensure the protection of both the lender and the borrower. A bank typically requires a prospective borrower to fill out income source forms and conducts a credit check on the borrower's past borrowing activities. Other precautions a bank may take before issuing a loan include requiring a cosigner or collateral. Similarly, a regulated financial professional should follow their firm's policy regarding loans to customers, which often includes disclosure and preapproval to prevent conflicts of interest and ensure ethical business practices.