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CFA Level I · CFA Level I Exam · Guidance for Standard III: Duties to Clients

A member manages a trust under an investment management agreement that limits equity exposure to 40%. Local law imposes a fiduciary duty that is stricter than the Code and Standards. After the equity market rallies, the member believes a 55% equity weighting would benefit the beneficiaries. The member's most appropriate action is to:

She should keep equity within the 40% limit and seek an amendment to the governing documents, following the stricter legal duty. Governing documents are the primary determinant of her powers, and acting contrary to them risks violating Standard III(A).

  1. Araise equity to 55% because Standard III(A) imposes only a minimum benchmark of conduct
  2. Braise equity to 55% if she believes it is in the beneficiaries' best interest and informs them afterwards
  3. Ckeep equity within 40% and seek a change to the governing documents, following the stricter legal dutyCorrect

Explanation

Governing documents are the primary determinant of the manager's powers and duties, and acting contrary to them risks violating Standard III(A). Members must also follow the strictest requirement, including any legal fiduciary duty. Her belief about benefit does not override the parameters, so she should pursue a formal amendment.

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