Lecture C - Standard III Duties to Clients
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Standard III outlines the duties CFA charterholders owe to their clients, including the duties of loyalty, prudence, care, fair dealing, suitability, performance presentation, and preservation of confidentiality. Specifically, it states that members must act in the best interest of clients, make suitable investment recommendations based on a client's needs and constraints, communicate performance information fairly and accurately, and keep client information confidential.
Lecture C - Standard III Duties to Clients
- 1. Standard - III Duties to Clients CMT LEVEL - I
- 2. Code of Ethics & Standards Professionalism Integrity of Capital Markets Duties to Clients Duties to Employers Investment Analysis, Recommendations, and Actions Conflicts of Interest
- 3. Standard III - Duties to Clients Loyalty, Prudence, and Care Fair Dealing Suitability Performance Presentation Preservation of Confidentiality
- 4. Standard III (A) - Loyalty, Prudence, and Care •Members and Candidates have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. •Members and Candidates must act for the benefit of their clients and place their clients’ interests before their employer’s or their own interests.
- 5. Standard III (B) - Fair Dealing •Members and Candidates must deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action, or engaging in other professional activities.
- 6. Standard III (C) - Suitability • When Members and Candidates are in an advisory relationship with a client, they must: a) Make a reasonable inquiry into a client’s or prospective client’s investment experience, risk and return objectives, and financial constraints prior to making any investment recommendation b) Determine that an investment is suitable to the client’s financial situation and consistent with the client’s written objectives, mandates, and constraints before making an investment recommendation or taking investment action. c) Judge the suitability of investments in the context of the client’s total portfolio.
- 7. Standard III (C) - Suitability •When Members and Candidates are responsible for managing a portfolio to a specific mandate, strategy, or style, they must make only investment recommendations or take only investment actions that are consistent with the stated objectives and constraints of the portfolio.
- 8. Standard III (D) - Performance Presentation •When communicating investment performance information, Members and Candidates must make reasonable efforts to ensure that it is fair, accurate, and complete.
- 9. Standard III (E) - Preservation of Confidentiality •Members and Candidates must keep information about current, former, and prospective clients confidential unless: 1. The information concerns illegal activities on the part of the client or prospective client, 2. Disclosure is required by law, or 3. The client or prospective client permits disclosure of the information.