Q19.For this specific situation, which of the following policy statements should be adopted to ensure that future violations of this kind do not occur?

A)         Before advising individual clients, managers should review the recommendations provided by the firm's research department. From this set of recommendations, they should select those securities that provide the expected highest return on investment. Managers should review the investor's portfolio at least monthly to see if existing securities should be replaced with those more recently recommended. Managers should turnover portfolios frequently and concentrate holdings within portfolios in order to achieve the highest possible returns for clients.

B)         Before making any recommendations or taking any investment actions, managers should formulate an investment policy for a client. They should consider the type and nature of the client and should obtain and analyze necessary information on the client's objectives (risk and return) and constraints. Managers should maintain and review regularly the investor's objectives and constraints to reflect any changes in the client's circumstances. Where appropriate, managers should properly diversify portfolios.

C)         When making recommendations or taking investment actions, managers should seek to minimize the client's portfolio risk. Managers should review the recommendations of the firm's research department to identify securities with low volatility. In making asset allocation recommendations or decisions for discretionary accounts, managers should weight the portfolios towards dividend-paying stocks and other income-producing assets such as bonds and mortgage REITS. Managers should review portfolios at least semi-annually.

Q20.The best way to determine the suitability of an investment is:

A)   based on portfolio performance results, presented as a weighted average, from the biggest financial companies.

B)   by administration of a specially designed survey of the client's opinions.

C)   to consider the financial situation, investment experience, and investment objectives of the client.

Q21.A broker was sanctioned for unsuitable recommendations and excessive trading involving three accounts under his care. These clients were unsophisticated, inexperienced individual investors with limited means. According to CFA Institute Standard III(C), Suitability, which of the following is least likely to be considered a relevant factor in determining the appropriateness and suitability of investment recommendations or actions for each portfolio or client?

A)   Basic characteristics of the total portfolio.

B)   Needs and circumstances of the portfolio or client.

C)   Best interests of the investment professional.

答案和详解如下：

A)         Before advising individual clients, managers should review the recommendations provided by the firm's research department. From this set of recommendations, they should select those securities that provide the expected highest return on investment. Managers should review the investor's portfolio at least monthly to see if existing securities should be replaced with those more recently recommended. Managers should turnover portfolios frequently and concentrate holdings within portfolios in order to achieve the highest possible returns for clients.

B)         Before making any recommendations or taking any investment actions, managers should formulate an investment policy for a client. They should consider the type and nature of the client and should obtain and analyze necessary information on the client's objectives (risk and return) and constraints. Managers should maintain and review regularly the investor's objectives and constraints to reflect any changes in the client's circumstances. Where appropriate, managers should properly diversify portfolios.

C)         When making recommendations or taking investment actions, managers should seek to minimize the client's portfolio risk. Managers should review the recommendations of the firm's research department to identify securities with low volatility. In making asset allocation recommendations or decisions for discretionary accounts, managers should weight the portfolios towards dividend-paying stocks and other income-producing assets such as bonds and mortgage REITS. Managers should review portfolios at least semi-annually.

Correct answer is B)

Standard III(C) requires that members shall “make a reasonable inquiry into a client’s financial situation, investment experience, and investment objectives prior to making any investment recommendations and shall update this information regularly to allow the members to adjust their investment recommendations to reflect changed circumstances.” The other policy statements focus on maximizing returns or minimizing risk. These statements may be inconsistent with the needs and circumstances of each individual client.

Q20.The best way to determine the suitability of an investment is:

A)   based on portfolio performance results, presented as a weighted average, from the biggest financial companies.

B)   by administration of a specially designed survey of the client's opinions.

C)   to consider the financial situation, investment experience, and investment objectives of the client.

Correct answer is C)

Although broad in scope, the best way to determine suitability is to consider the financial situation, investment experience and investment objectives of the client. Both of the other choices deviate from these essential issues.

Q21.A broker was sanctioned for unsuitable recommendations and excessive trading involving three accounts under his care. These clients were unsophisticated, inexperienced individual investors with limited means. According to CFA Institute Standard III(C), Suitability, which of the following is least likely to be considered a relevant factor in determining the appropriateness and suitability of investment recommendations or actions for each portfolio or client?

A)   Basic characteristics of the total portfolio.

B)   Needs and circumstances of the portfolio or client.

C)   Best interests of the investment professional.

Correct answer is C)         

Determining appropriateness and suitability focuses on the portfolio or client, not on the investment professional. Investment professionals should take particular care to ensure that their goals in selling products or executing security transactions do not conflict with the best interests of the client.

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