Q1. Larry Smith, CFA, is the new equity portfolio manager for a socially responsible mutual fund. The investment policy statement stipulates which stocks do not meet the fund’s definition of socially responsible. Because Smith was new to the fund, he did not personally agree to the stocks that were forbidden. Subsequently, he included a stock into the portfolio that was on the restricted list. Which of the following statements is FALSE?

A)   Smith did not violate the investment policy statement.

B)   Smith was responsible for reading and understanding the investment policy statement prior to stock selection.

C)   Smith is to be held responsible for the investment policy statement even though it was written before he was employed at the fund.

Q2. An investment policy statement benefits investment advisors because it provides:

A)   guaranteed legal protection against errors in omission lawsuits.

B)   an understanding of the advisory relationship between manager and client.

C)   guidelines for capital market expectation formations.

Q3. An investment policy statement does NOT provide which of the following?

A)   Long-term investment decision making guidelines.

B)   Guaranteed investment returns.

C)   Weighting ranges for asset allocation.

Q4. Clients can benefit from an investment policy statement which:

A)   provides for legal recourse due to portfolio underperformance.

B)   dictates how to spend extra liquidity.

C)   provides long-term investment discipline deterring short-term knee-jerk portfolio adjustments.

Q5. Which of the following statements concerning an investor’s policy statement is FALSE? The investment policy statement:

A)   determines the client's ability and willingness to take risk.

B)   should represent the long-term objectives of the investor.

C)   provides guidance to the investment advisor regarding issues of appropriateness of decisions.

答案和详解如下：

Q1.Correct answer is A)

Smith is in clear violation of the fund’s investment policy statement. Just because he is new to the fund, does not exempt him from following the statement. Most investment policy statements contain a stated review process that provides direction for dispute resolution.

Q2. Correct answer is B)

The investment policy statement provides an understanding of the relationship between manager and client. The investment policy statement does not provide guaranteed legal protection or how to form capital market expectations.

Q3. Correct answer is B)

An investment policy statement does not provide guaranteed investment results.

Q4. Correct answer is C)

The purpose of an investment policy statement is to provide long-term discipline in investment decision making. The investment policy statement protects against short-term portfolio adjustments resulting from investor panic or overconfidence.

Q5. Correct answer is A)

The investment policy statement does not determine the client’s ability and willingness to take risk. These are a function of the client’s situation and personality type. The IPS should, however, discuss the client’s willingness and ability to take risk.

Thank you!