AuthorTopic: An ethics question - the beneficiary is the trust?
@2018-08-12 08:37:03
XYZ, CFA, manages a trust fund whose beneficiary is an orphaned student. The investment policy dictates that trust assets are expected to provide the student with a stable, low-risk source of income until he reaches the age of 25 years. Based on information from a website, the student asks XYZ to invest in a new business venture that he expects will provide high returns over the next few years. XYZ ignores the request, instead securing conservative investments to provide sufficient income. Did XYZ violate the CFA Institute Standards of Professional Conduct?

a)Some random option
b)No because client objectives were met

I chose c). My reasoning was that the client is the student and if the investment is not suitable the manager should at least educate her about that instead of straightforward ignoring the request.

But the answer is b). The explanation states that the trust is the client not the beneficiary. I thought the beneficiaries were always the clients. Any inputs?
@2018-08-27 21:56:00
The client is the trust fund. a trust fund will have trustees and beneficiaries, it is the fiduciary responsibility of the manager to adhere to the trusts investment policy not the beneficiary

You may be able to imagine the situation where parents set aside funds to cater for a child until reaching 25, and want to prevent him spending the money recklessly.

CFA Discussion Topic: An ethics question - the beneficiary is the trust?

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Edward Liu

Edward Liu