Q4. Karen Jackson is a portfolio manager for Super Selection.  Jackson is friendly with David James, president of AMD, a rapidly growing biotech company. James has provided Jackson with recommendations in the biotech industry, which she buys for her own portfolio before buying them for her clients. For three years, Jackson has also served on AMD's board of directors. She has received options and fees as compensation.

Recently, the board of AMD decided to raise capital by voting to issue shares to the public. This was attractive to board members (including Jackson) who wanted to exercise their stock options and sell their shares to get cash. When the demand for initial public offerings (IPO) diminished, just before AMD's public offering, James asked Jackson to commit to a large purchase of the offering for her portfolios. Jackson had previously determined that AMD was a questionable investment but agreed to reconsider at James' request. Her reevaluation confirmed the stock to be overpriced, but she nevertheless decided to purchase AMD for her clients' portfolios.

Did Jackson violate Standard III(C) concerning Portfolio Recommendations and Actions?

A)    Yes, she did not consider the appropriateness and suitability of investment recommendations or actions for each portfolio or client.

B)    Yes, she did not deal fairly with all clients.

C)    No.

答案和详解如下：

Q4. Karen Jackson is a portfolio manager for Super Selection.  Jackson is friendly with David James, president of AMD, a rapidly growing biotech company. James has provided Jackson with recommendations in the biotech industry, which she buys for her own portfolio before buying them for her clients. For three years, Jackson has also served on AMD's board of directors. She has received options and fees as compensation.

Recently, the board of AMD decided to raise capital by voting to issue shares to the public. This was attractive to board members (including Jackson) who wanted to exercise their stock options and sell their shares to get cash. When the demand for initial public offerings (IPO) diminished, just before AMD's public offering, James asked Jackson to commit to a large purchase of the offering for her portfolios. Jackson had previously determined that AMD was a questionable investment but agreed to reconsider at James' request. Her reevaluation confirmed the stock to be overpriced, but she nevertheless decided to purchase AMD for her clients' portfolios.

Did Jackson violate Standard III(C) concerning Portfolio Recommendations and Actions?

A)    Yes, she did not consider the appropriateness and suitability of investment recommendations or actions for each portfolio or client.

B)    Yes, she did not deal fairly with all clients.

C)    No.

Correct answer is A)

Jackson violated Standard III(C) because she did not consider her clients' financial situation, investment experience, and investment objectives. If the stock is questionable and overpriced, it is not suitable for any of her clients.

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