- CFA Exams
- CFA Level I Exam
- Study Session 1. Ethical and Professional Standards
- Reading 3. Guidance for Standards I-VII
- Subject 7. Standard III (A) Loyalty, Prudence, and Care
CFA Practice Question
In terms of CFA Institute's Standards of Professional Conduct when dealing with the procedures for compliance per Standard III(A) Loyalty, Prudence, and Care, which of the following are factors that would aid in complying with this standard?
II. Diversification: all portfolios should be adequately diversified unless the plan guidelines state otherwise.
III. Deal fairly with all clients.
IV. Conflicts of interest: all conflicts must be disclosed.
I. Follow all the applicable laws and rules.
II. Diversification: all portfolios should be adequately diversified unless the plan guidelines state otherwise.
III. Deal fairly with all clients.
IV. Conflicts of interest: all conflicts must be disclosed.
A. I, II and III
B. I, II and IV
C. All of the above
Explanation: Standard III (A) Loyalty, Prudence, and Care:
- Follow all the applicable laws and rules
- Establish the investment objectives of the client, taking into account the client's needs and circumstances and the investment's basic characteristics.
- Diversification: all portfolios should be adequately diversified unless the plan guidelines state otherwise.
- Deal fairly with all clients.
- Conflicts of interest: all conflicts must be disclosed.
User Contributed Comments 7
User | Comment |
---|---|
ThePessimist | III is not correct! III(A) only requires dealing fairly with clients with respect to investment actions. Fair dealing in general is required by Standard III(B). |
fahad | fair dealing here refers in a genral loyalty perspective so the answer is right. |
soukhov | tricky one |
farhan92 | this issue i have with this is how people interpret such a vague statement like III differently. I understood it in the same way as The Pessimist. |
becinator | Agree with farhan92 |
rthbardian | These are ridiculous! Is it fair dealing as understood by anyone with a reasonable grasp of English, or as "fair dealing" as a custom CFA definition? It's just a toss-up question. Very frustrating. |
denbol | i thought that "conflict of interest" is VI Standart, not III |