Reading 2-III: Standards of Professional Conduct & Guida

assets, accounts, management, his, auto

Q7.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?

A) Implement a similar policy for the other client who did not just get married.

B) Assess the return objectives of the newly married client and his spouse.

C) Assess the time horizon of the newly married client and his spouse.

Q8.Janet Reilly has just approached Betty Miller, CFA, about purchasing 10,000 shares of Brookshire Co., a newly incorporated real estate development firm. Reilly is a retired schoolteacher living off the income from her late husband's life insurance policy. This investment will represent a significant shift in her investment portfolio. Brookshire Co. is a local firm that has recently received a lot of press concerning some exciting, but speculative projects that they have undertaken in the region. Consistent with the Standards, Miller should:

A) accept Reilly's order after she acquaints Reilly with the downside risks associated with a risky investment of this type.

B) not accept the order, because it is not a suitable investment for Reilly.

C) accept Reilly's order, but have her sign a disclaimer absolving Miller of any potential losses.

Q10.What is the required frequency for updating information on each client’s financial situation, investment experiences, and investment objectives?

A) Regularly.

B) Only during the first meeting with the client.

C) Every year.

Q11.If an analyst has a policy of making an inquiry into a client’s financial situation, investment experience, and investment objectives regularly, this is:

A) neither of these.

B) a violation of Standard III(E), concerning client confidentiality.

C) congruent with Standard III(C), Suitability.