Sooraj thank you - was not aware that the maintainence of records applied to this particular case. Does make sense now.
Sooraj riddle me this one - my interpretation was she did indeed CONSIDER the suitability, knew it was unsuitable, but went ahead anyway and screwed her clients, so it was a violation of fair dealing - but is there any way to know here they are going for suitability and not fair dealing? Thanks
Karen Jackson is a portfolio manager for Super Selection. Jackson is friendly with David James, president of AMD, a rapidly growing biotech company. James has provided Jackson with recommendations in the biotech industry, which she buys for her own portfolio before buying them for her clients. For three years, Jackson has also served on AMD’s board of directors. She has received options and fees as compensation.
Recently, the board of AMD decided to raise capital by voting to issue shares to the public. This was attractive to board members (including Jackson) who wanted to exercise their stock options and sell their shares to get cash. When the demand for initial public offerings (IPO) diminished, just before AMD’s public offering, James asked Jackson to commit to a large purchase of the offering for her portfolios. Jackson had previously determined that AMD was a questionable investment but agreed to reconsider at James’ request. Her reevaluation confirmed the stock to be overpriced, but she nevertheless decided to purchase AMD for her clients’ portfolios.
Did Jackson violate Standard III© concerning Portfolio Recommendations and Actions?
A) Yes, she did not deal fairly with all clients. B) No. C) Yes, she did not consider the appropriateness and suitability of investment recommendations or actions for each portfolio or client.
Your answer: A was incorrect. The correct answer was C) Yes, she did not consider the appropriateness and suitability of investment recommendations or actions for each portfolio or client.
Jackson violated Standard III© because she did not consider her clients’ financial situation, investment experience, and investment objectives. If the stock is questionable and overpriced, it is not suitable for any of her clients.
Knowing it as unsuitable and still buying it is failing in SUITABILITY, my friend. Just imagine, you analysed and knew you were wrong and then still bought what others told you to buy. So you might as well not have analysed the stock right? So definitely SUITABILITY was compromised here.
"which she buys for her own portfolio before buying them for her clients."
And funnily enough she did not treat her customers fairly too as indicated by the above statement. So I would say both suitability and fair treatment was compromised. But then again the choices are such that you can only choose one!!! So this is definitely not a completely correct question IMHO.
But hope you understood what I wrote in the first para, very important dont miss it! Cheers!
Yeah, I guess she ‘considered’ suitability but then disregarded her own consideration of it, so this is not being ‘considerate’ of her clients - but still I think the choice is wrong because she did indeed consider it, she just acted in a way that violated her own opinion…
AHHH Sooraj I see. The only clear way to know it is C is because the fair deailing was a violation of III(B) and not III© - I’m putting this in the realm of ridiculous.
Frustrated,
frgna
To be fair to CFAI, they would never test you like this. ie whether IIIA is XXXXX vs IIIB is YYYYY. They never test like that and this question I believe is an aberration.
Relax mate, a couple of weeks to go 
Good luck!
Couple of days now! Haha. Still averaging ~75% in the schweser, so hopefully just get lucky and have a good Ethics session come saturday
Thanks for the help, you’re quite good at these!
Happy to be of any help!
Good luck folks, crack ethics crack equity —> crack CFA level 1
I was only referring here to the fact that any answer set that doesn’t include Soprano making inappropriate comments/advances on Dr. Melfi is really far out of the realm of reality.
It’s just distracting when you’re imagining your favorite TV and movie characters during ethics questions, esp if they are in the wrong roles. Melfi is supposed to be a psychiatrist, and Soprano is a person/family, not a firm - well it’s kind of a firm I guess - but definitely not an ethical one.
Haaaa, now I understand