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Basic Question 3 of 5
Susan Miller, CFA, works for an investment-counseling firm. James Sims, a new client of the firm, is meeting with Miller for the first time. Sims had used another counseling firm for financial advice for years, but has switched his account to Miller's firm. After a few minutes of "get-acquainted" small talk, Miller explains to Sims that she has discovered a highly undervalued stock that offers large potential gains. She recommends that he purchase the stock for his account. Miller has committed a violation of CFA Institute's Standards of Professional Conduct. What should she have done differently?
B. She should have questioned Sims on the reasons that he changed counseling firms. If the discovery process indicated that he had been treated unfairly at the other firm, Miller has a responsibility to notify CFA Institute of any violation.
C. She should have determined Sims' needs, objectives, and tolerance for risk before making a recommendation for any type of security.
A. She should have thoroughly explained the characteristics of the company to Sims, including the characteristics of the industry in which the firm operates.
B. She should have questioned Sims on the reasons that he changed counseling firms. If the discovery process indicated that he had been treated unfairly at the other firm, Miller has a responsibility to notify CFA Institute of any violation.
C. She should have determined Sims' needs, objectives, and tolerance for risk before making a recommendation for any type of security.
User Contributed Comments 10
| User | Comment |
|---|---|
| Khadria | Why not "B"? Is it not the duty of a CFA member to inform CFA institute about any violation? May be not!!! |
| ribi | No. CFA Institute would be super-busy and flooded with such violations if a member were supposed to inform it of any violations. |
| bobert | It doesn't even mention if the other counseling firm was CFA or not. The CFAI is not a policing force for those who commit violations. Let the SEC and like agencies deal with that. |
| sushovan | Why not A and C : its the duty to explain fully the charateristics of the company in which the client is going to enter |
| myron | Make a reasonable inquiry into a client or prospective client's investment experience, risk and return objectives... C is more correct than A. |
| dblueroom | C is before A |
| 8thlegend | Susan Miller have yet to manage Sim's assets. Unless she was in possession of Sim's assets, she has no responsibility |
| nayagan | C is step one for anything |
| johntan1979 | A is never a correct answer and a violation of III(C). Keywords: new client, making recommendations after only a few minutes of getting to know new client |
| Inaganti6 | 9 comments for a question anyone could've answered and i mean anyone, even someone with a degree in Nigerian Fashion Designing. |
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Learning Outcome Statements
demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity
recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct
identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards
CFA® 2025 Level I Curriculum, Volume 6, Module 3.