Good Job Anish … you really know your stuff !! The answer to the question was soo obvious I have a lot to learn !!
Ok, its no violation here’s why. While it’s a general report she could still find it unsuitable accross the board due to impending bankruptcy, low sharpe ratio, etc. Or, she may manage acccounts that share the same traites making them all share the same suitability. The quesiton does not address this thus giving us no grounds to assume that it is a suitabilitity issue, no conflict there. Secondly in return to pro rata (portfolio size) that does not imply order. It simply stated that she was liquidating half of hte holdings, and applying the sold positions to the accounts based on account size. This in itself indicates that the accounts share similar composition which falls into my point above about the accounts sharing like traits and suitability.
slouis you’re not correct, its not guilty until proven innocent here. There’s no portion of the CFA curriculum that says, “if it doesn’t say she checked for suitibility, she didn’t check.” More correctly, the scenarios outlined per CFA test standards are such that they are asking for violations based on the given information, not the ungiven information. It is asking for you to find stated violations not assume unstated violations. Also, in most large cap firms, clients are grouped into pooles that share basic objectives and risk (suitability) so that PM’s with $300MM AUM don’t have to read through 3000 prospectus statements everytime they want to perform a trade.
Thx. the answer given was a. hence the answer to this question is a, she didn’t check for suitability and therefore it is a violation. Even though I did not like it at first, it is pretty straightforward actually.
The text gave the answer a? I’m not buying it, there’s a reason approximately 2 people in the universe use allen to prepare.
nobody is buying anything. allen provides a free online question of the day. I visit over coffee and attempt to answer them. I thought this was off so I posted it for discussion. If you don’t like their explanation you are free to answer how you like in June. I think you are just bitter because I simultaneously set you straight in two separate threads. slouiscar - 2 black swan - 0
ouch …
“ouch…” Not really, you win some, you lose some. It’s CFA ethics. Slouiscar himself said “he thought this was off” meaning at some point we had similar doubts unless I’m misinterpreting. I still hold my opinion on this one, because I’m not sure the Allen approach of guilty until proven innocent is correct.
THe logic is very straightforward, When you sell assets for a client you have to rebalance its portfolio, if it does not say that she has bought another asset of similar type to rebalance the portfolio to ist original sector composition. Then she has not been dillingent and has done a trade without checking for suitability, The answer was definitively a
Doesn’t specify that this single stock was enough to materially alter the sector composition. Not to mention the fact that many funds aren’t defined by sector but rather by general performance traits.