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

A portfolio manager recommends a pooled fund to clients after reviewing its recent returns. She has not looked at the fund's fee structure or the management team's history. Her action is most likely:

She most likely violated Standard V(A). Members must make reasonable efforts to consider all pertinent issues, and the guidance names a pooled fund's fee structure and management history as attributes to consider. Reviewing only recent returns does not form a reasonable basis for the recommendation.

  1. Aacceptable, because past returns are the most important attribute of a pooled fund
  2. Ba violation of Standard V(A), because she did not consider pertinent issues such as fees and management historyCorrect
  3. Cacceptable, because Standard V(A) only requires that she keep records of the returns she reviewed

Explanation

The guidance lists a pooled fund's fee structure and management history as attributes to consider when forming a basis for a recommendation. Members must make reasonable efforts to consider and address all pertinent issues. Looking only at returns omits pertinent issues, and Standard V(A) is not satisfied by record keeping alone.

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