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

An analyst changes a recommendation on a stock from buy to sell. A client who held the stock on the earlier advice now places an order to buy more shares, apparently unaware of the change. Under Standard III(B), the analyst should most appropriately:

The analyst should advise the client of the changed recommendation before accepting the order. Standard III(B) requires material changes to reach all current clients, especially those who acted on earlier advice, and clients unaware of a change who order contrary to it must be informed first.

  1. Aaccept the order and notify the client after execution
  2. Badvise the client of the changed recommendation before accepting the orderCorrect
  3. Cexecute the order because the client's instruction is binding

Explanation

Material changes must reach all current clients, with particular care for those who have acted on or been affected by the earlier advice. Clients who place orders contrary to a current recommendation should be told of the change before the order is accepted.

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