标题: Ethics - Suitability vs. Diligence and Reasonable Basis [打印本页] 作者: kmf229 时间: 2013-4-28 05:55 标题: Ethics - Suitability vs. Diligence and Reasonable Basis
Help please!
I am getting confused with the two. If an investment adviser have no reasonable basis for recommending stock A and puts it in a client’s portfolio that doesn’t suit them.
Are they in violation of both IIIC) Suitability and VA) Diligence and Reasonable Basis?
Thanks.作者: zbird2134 时间: 2013-4-28 05:56
It would depend how the question was worded.
For example, you could have reasonable basis for recommending Apple stock (stock A) as your client requires medium-term capital growth and your analysis indicates that Apple stock will likely achieve this, but if your client expressely states he/she doesn’t like technology stocks then it wouldn’t be a suitable investment.
Convesrsely, your client might state he/she favours corporate bonds issued by financial institutions, but if you invested in a 50-year Goldman bond which appears over-valued against comparables then whilst it would be suitable you would not have reasonable basis.
If you picked an unsuitable stock, but also one that was overvlued, then technically you would breach both suitability and reasonable basis….but you would also be an idiot and crap investment advisor, and chances are you wouldn’t have a job much longer so it probably wouldn’t matter anyway!
