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

Chen is a portfolio manager at a firm that sells a pooled equity fund with a stated growth mandate. A retail investor buys fund shares through a broker with no advice from Chen. Which statement about Chen's suitability responsibility is most accurate under Standard III(C)?

Chen must manage the fund consistently with its stated mandate but need not judge the fund's suitability for individual purchasers. Suitability responsibility for clients rests only on members who have an advisory relationship with them, which Chen lacks with this retail buyer.

  1. AChen must update the investor's risk profile each year
  2. BChen must confirm the fund is suitable for every purchasing investor
  3. CChen must manage the fund consistently with its mandate but need not judge its suitability for individual purchasersCorrect

Explanation

Managers of pooled assets to a specific mandate are not responsible for determining the suitability of the fund for investors buying shares. That responsibility is conferred only on those with an advisory relationship with clients. Chen has no advisory relationship with this investor, though Chen must still stay within the mandate.

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