QID - 12274 The Konkol Company implements a new methodology for portfolio valuation that is licensed to them by ABC Statistics. Konkol complies with the CFA Institute Code and Standards by: A) discussing the new methodology with clients only when in a change in the security selection process is involved. B) not discussing the new methodology with clients because it is the property of ABC, which controls all user rights. C) discussing the new methodology with the clients, in its entirety. D) not discussing the new methodology with clients because there is no need to, as it will not change their risk and yield preferences. Your answer: A was incorrect. The correct answer was C) discussing the new methodology with the clients, in its entirety. Standard V(B), Communication with Clients and Prospects, requires any change in the scope, valuation methodology, or focus of the portfolio to be discussed with clients. ======== Code V B. states that “basic format” & “general principles” of investment process should be communicated to client. Why company has to discuss the “licensed” model in its “entirety” , if it doesn’t change the security selection process?
“Members and candidates must adequately illustrate to clients and prospective clients the manner in which the member or candidate conducts the investment decision-making process. The member or candidate MUST keep existing clients and other interested parties informed with respect to changes to the chosen investment process on an ongoing basis. Only by thoroughly understanding the nature of the investment product or service can a client determine whether changes to that product or service could materially affect the client’s investment objectives”