Changing Investment Objectives

Question 1

Relevant Standards

Answer 1

Standard III (C.2): Duties to Clients

• When members and candidates are responsible for managing a portfolio to a specific mandate, strategy, or style, they must only make investment recommendations or take investment actions that are consistent with the stated objectives and constraints of the portfolio.

Standard V (B.1) – Communication with Clients and Prospective Clients.

• Members must disclose to clients the basic format and general principles of the investment processes by which securities are selected and portfolios are constructed and shall promptly disclose to clients and prospects any change that might materially affect those processes

Question 2

Recommended Steps for Compliance

Answer 2

To remain in compliance with CFA Institute Standards, a portfolio manager must:

• Determine a client’s financial situation, investment experience, and investment objectives. Update this information at least annually.
• Adequately disclose the basic security selection and portfolio construction processes.
• Conduct regular internal checks for compliance with these processes
• Stick to the stated investment strategy if managing to a specific mandate or strategy
• Notify investors and potential investors of any potential change in security selection and portfolio construction processes.
• Secure documentation of authorization of the change in strategy from the client.