Standard III: Duties to Clients Flashcards
What does Standard III(A) require?
Requires that members and candidates have a duty of care to their clients and must act with reasonable care and exercise prudent judgement.
- Must act for the benefits of clients and place client interest above their own.
What is the general rule in relation to soft commissions?
Soft commissions - where the investment manager uses client brokerage to purchase research services: this is a violation if the benefit is not corresponded to the client
What is the rule in relation to proxies?
Must vote on proxies for the best interest of the client
What does Standard III (B require?
Fair dealing
- Deal fairly and objectively with all clients
- when providing investment analysis, recommendations, investment action, or other professional activity
How does standard III(B) impact investment recommendations?
Ensure that all clients have a fair opportunity to act on every recommendation
How does standard III(B) impact on investment actions?
Must treat clients in light of their investment objectives and circumstances
When are clients able to receive superior treatement sometimes?
If they pay more fees- and as long as this structure is known and disclosed to other clients
What does standard III(C) require?
Suitability
In an advisory relationship, member must
a. make inquiry into client investment experience, risk and return objectives and financial constraints
b. Determine an investment that is suitable to clients financial situations and written objectives
c. Judge suitability of investments in the context of the total portfolio
2. When managing a portfolio: must only make recommendations or actions that are consistent with the stated objectives of the portfolio
What is an investment policy? How often should they be updated?
Includes clients financial circumstances, personal data that are relevant to investment decisions, risk and objectives in investing, and should be updated annual and also prior to material changes to any specific investment recommendations or decisions
What does standard III(c) require in relation to diversification?
Must consider investments in the context of the clients whole portfolio
How should unsolicited trading requests from clients be responded do
Conduct in accordance with the firms policies, and may also involve updating the investment policy
What does standard III(D) require?
Performance presentation
When communicating investment performance information, Members and Candidates must make reasonable efforts to ensure that it is fair, accurate and complete
What does standard III(E) require?
Preservation of confidentiality
Members must keep info about current, formed and prospective clients confidential unless;
1) Information concerns illegal activities on the part of the client
2) Disclosure is required by law
3) Client or prospective client permits disclosure
What are the rules in relation to compliance with the law and standard III(E)?
If the law requires DISCLOSURE of the information > then must comply with the law
If the law requires CONFIDENTIALITY, even if the information contains illegal activities, members must not disclose such information
