Reading 1- LOS LOS A (Part 2): Q2 black, class

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2、Liam McCoy, CFA, has lunch with a wealthy client whose portfolio he manages. McCoy advises the client to double his current position in the JKM Corporation due to an anticipated increase in sales. In accordance with Standard (V) Investment Analysis, Recommendations and Actions, when McCoy returns to his office he should:

A)   identify other clients for whom JKM may be a suitable investment and notify them immediately of his recommendation.

B)   execute his client’s order, and then consider whether or not JKM might be a suitable investment for McCoy’s personal portfolio.

C)   document the details of the conversation with the client with regard to his investment recommendation.

D)   verify the suitability of the investment recommendation before placing the client’s order.

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The correct answer was C)

Standard V(C) Record Retention requires that Members and Candidates document all recommendation and communications with clients. McCoy should document the details of the conversation, including any resulting investment decisions and/or actions. The suitability of the investment should have already been considered before the recommendation and McCoy should not execute the order until the the client instructs him to. Identifying other clients for this investment would fall under Standard III(B) Fair Dealing.