Question #35 - Reading 42.3 Standards of Professional Conduct Guidance for Standards III

Reading: Reading 42.3 Standards of Professional Conduct Guidance for Standards III

PDF File: Reading 42.3 Standards of Professional Conduct Guidance for Standards III.pdf

Page: 15

Status: Correct

Correct Answer: A

Shared Context

- Do QED's policies comply with CFA Institute Standards of Professional Conduct with respect to the information contained within the client IPS' and the frequency with which the information is updated? Information Frequecy A) No Yes B) Yes No C) No No

Question

In light of Singh's comments during his telephone call to Patel prior to his uncle's death, which of the following actions that Patel can take comply with CFA Institute Standards of Professional Conduct?

Answer Choices:

A. Patel must adhere to the existing portfolio strategy until she meets with Singh to develop a new portfolio strategy based upon updated financial information, but may place trades which are consistent with the existing strategy

B. Patel may change the current portfolio strategy and begin trading based upon Singh’s expectations because he advised her to do so

C. Patel must not place any trades in the account until she meets with Singh to develop a new portfolio strategy based on the updated information

Explanation

According to Standard III(C)—Suitability, Patel must observe the written investment objectives now in effect as determined in cooperation with the client and may trade only on that basis. Because the anticipated change in Singh's financial condition was subject to an event of indeterminable timing, she should continue to honor the existing written investment objectives until a change is warranted by an actual increase in the client's total financial assets and has been agreed upon with her client. (Module 42.5, LOS 42: III(C))

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