Question #54
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: 22
Status: Correct
Correct Answer: B
Question
Bob Hatfield, CFA, has his own money management firm with two clients. The accounts of the two clients are equal in value. One of the clients gets married and the assets of the new spouse and the client are combined. With the larger portfolio of the now married client, Hatfield determines that they can assume a higher level of risk and begins a change in the policy concerning that portfolio. Which of the following would violate Standard III(C), Suitability?
Answer Choices:
A. Implement a similar policy for the other client who did not just get married
B. Assess the time horizon of the newly married client and his spouse
C. Assess the return objectives of the newly married client and his spouse
Explanation
According to Standard III(C), Suitability, the analyst must assess the time horizon, return
objectives, tax considerations, and liquidity needs of a client before changing an
investment policy. The analyst must notify the client of the new policy. Implementing the
policy for the other client may be a violation of the Standard unless that client's needs are
totally reassessed and determined to be identical to the needs of the newly married client.
(Module 42.5, LOS 42: III(C))