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CFA Level I · CFA Level I Exam · Guidance for Standard V: Investment Analysis, Recommendations, and Actions

A portfolio manager changes the investment process by replacing a fundamental stock-selection screen with a quantitative momentum model. The change could materially affect how portfolios are constructed. Under Standard V(B), the manager is most likely required to:

The manager must promptly disclose the change to clients and prospective clients. Standard V(B) requires prompt disclosure of any change that might materially affect the investment process, and a material change in how securities are selected qualifies. Delaying until an annual review or telling only some clients falls short.

  1. Await until the next annual review before informing clients of the change.
  2. Bpromptly disclose the change to clients and prospective clients.Correct
  3. Cinform only those clients whose portfolios hold the affected securities.

Explanation

Standard V(B) requires members to promptly disclose to clients and prospective clients any changes that might materially affect the investment process. Waiting for an annual review is not prompt. Limiting disclosure to some clients ignores that prospective clients must also be told.

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