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) document the details of the conversation with the client with regard to his investment recommendation. C) execute his client’s order, and then consider whether or not JKM might be a suitable investment for McCoy’s personal portfolio. D) verify the suitability of the investment recommendation before placing the client’s order.
A
I say B b/c he should have already determined suitability for his other clients. That way he can make all the relevant recommendations (disseminate the information) around the same time.
@Bodymore: bingo. I wasn’t sure if it’s A or B, but you’re right, it’s B. For the reasons you mentioned. good job.
D - Standard (V) Investment Analysis, Recommendations and Actions Its not asking for investment priority (A) - or documentation (B) C also corresponds to the standard, but is obviously wrong.
mar350, it’s implied that he’s already determined suitability.
I say D because markets change. There may be a better option than to double one position at any given time. When you’re playing with millions you want to be sure you’re doing the right thing, especially when there are some many variables. If you’re saying D is wrong, I’d go with B to complete the client’s records.
How, or rather on what basis could we assume that a “suitability” check has been done for the other clients portfolios ? Edit: Ok I think I see my mistake. Since the question is asked in relation to Std V specifically, we’re assuming that Suitability has been done already, correct?
A) identify other clients for whom JKM may be a suitable investment and notify them immediately of his recommendation. I think use of the “other clients” in the situation where someone is making a recommendation to a “single wealthy client” is a red-herring. So obviously that choice is wrong. B) document the details of the conversation with the client with regard to his investment recommendation. C) execute his client’s order, and then consider whether or not JKM might be a suitable investment for McCoy’s personal portfolio. If he did this – he is in violation of Suitability, since he must determine suitability before the recommendation itself. D) verify the suitability of the investment recommendation before placing the client’s order. If he did this – he is in violation of Suitability, since he must determine suitability before the recommendation itself. So that leaves out choice B alone.
thanks cpk
EDIT: CPK already said it better than me. deleted.