Reading 3: Standards 3: Duties to Clients

Question 1

Standard 3: Duties to Clients

Answer 1

To have duties to clients means that you must act with reasonable care and exercise prudent judgement.

Question 2

Standard 3A: Loyalty, Prudence, and Care (Duty to Clients)

Answer 2

Members and candidates must have a loyalty to their clients and must act with reasonable care and exercise prudent judgement:

What are some examples of Duties to Clients?
-Exercise the prudence, care, skill, and diligence under the circumstances given

• manage pools of client assets in accordance with the terms of the governing documents
• make investment decisions in the context of the total portfolio (all investment decisions must be taken by looking at the total portfolio)
• inform clients of any limitations in an advisory relationship
• vote proxies in an informed and responsible manner.

Question 3

Standard 3B: Fair Dealing (Duty to Clients)

Answer 3

Deal fairly and equally with all customers.
This includes the following:

• you must not negatively affect or disadvantage any clients.
• give all clients a fair opportunity to act on every recommendation.
• treat investors fairly even depending on the amount they invest in the portfolio.

Question 4

Standard 3C: Suitability (Duties to Clients)

Answer 4

1. ) When members and candidates are in an advisory relationship with a client they must:
   - understand and match suitability of an investment based on: CLIENTS INVESTMENT EXPERIENCE, RISK/RETURN OBJECTIVES, and FINANCIAL CONSTRAINTS
   - must be suitable with the clients IPS- written objectives, mandates, and constraints before making an investment recommendation (PLEASE DISCUSS ALL DECISIONS WITH CLIENTS)
   - judge the suitability of the investments in the context of the client’s total portfolio
2. ) Make only investment recommendations or take only investment actions that are consistent with the stated objectives and constraints of the portfolio.

Question 5

Standard 3D: Performance Presentation

Answer 5

When communicating investment performance information, members and candidates must make reasonable efforts to ensure that it is fair, accurate, and complete information!

• PRESENTATIONS MUST HAVE FAIR, ACCURATE, AND COMPLETE INFO

Question 6

Standard 3E: Preservation of Confidentiality

Answer 6

Members and Candidates must keep information about current, former, and prospective clients confidential unless:

• ***please keep all client info secure, unless:
  a. ) information concerns illegal activity
  b. ) disclosure is required by law
  c. ) client or prospective client permits disclosure of the information