CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Kite has been hired by Watson Industries, Inc., to manage its pension fund. Kite's fiduciary duty is to ______.

A. the shareholders of Watson
B. the management of Watson
C. the participants and beneficiaries of Watson's pension plan
Correct Answer: C

User Contributed Comments 10

User Comment
aspazia why shareholders are not equivalent to beneficiaries???
Chitu shareholder's are not the participants in Pension fund. so 'C' is ok.
quynhnk79 Who are participants in this case? Pls explain?How is it different to beneficiaries and shareholders?
ngeorge Participants and beneficiaries are due a benefit under the pension plan (i.e. employees of the company and their beneficiaries). Shareholders are not due a benefit under the plan unless they also happen to be employees/participants. The pension fund is a trust maintained solely for the benefit of participants in the pension plan, not for the company or its shareholders.
TammTamm All of the answers for this question could be correct but if we apply the standard to it, we know that the beneficiaries of the pension fund are those who duty is owed.
copus good comment ngeorge - i think you nailed it!
cong fiduciary duty is owed to the clients.
Rachelle3 Kite is there to manage pension funds so C is the obvious choice it mentions pension plan read it carefully!!
Inaganti6 thanks ngeorge
sshetty2 the shareholders of Watson are not NECESSARILY the participants of the pension fund. In this case, Kite is hired to manage the pension fund and thus his fiduciary responsibility is to the participants/beneficiaries of the fund specifically.
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