Question #54
Reading: Reading 42.5 Standards of Professional Conduct Guidance for Standards V
PDF File: Reading 42.5 Standards of Professional Conduct Guidance for Standards V.pdf
Page: 27
Status: Incorrect
Correct Answer: B
Your Answer: A
Question
An analyst has constructed an investment policy statement (IPS) and a portfolio for a new client, Stephanie Sasser. He has also provided written guidelines on the processes used to make investment management decisions. Six month later, Sasser questions the analyst about several portfolio holdings. Due to a large allocation in financial services stocks during a severe market downturn, her portfolio has underperformed the benchmark by a large margin. Although the analyst remembers discussing the over-allocation with Sasser, and receiving her approval, he is unable to find supporting documents. Which of the following Standards has the analyst most likely violated?
Answer Choices:
A. Diligence and Reasonable Basis
B. Communications with Clients and Prospective Clients
C. Record Retention
Explanation
Standard V(C) Record Retention requires analysts to develop and maintain "...records to
support their investment analysis, recommendations...with clients and prospective
clients." The analyst is unable to document the over-allocation with respect to the
benchmark; this is most likely a violation of Standard V(C).
(Module 42.8, LOS 42: V(C))