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Basic Question 4 of 5
Clinton, a portfolio manager with Northwest Bank, has just been given investment authority for a newly-acquired pension account. Client objectives have not yet been established. On the day the account was received, $2 million in bonds matured, representing 4% of the portfolio. Which one of the following is Clinton's best course of action on that day?
B. He should invest the proceeds in cash equivalents until a meeting can be arranged to establish fund objectives.
C. He should make no decision until client objectives have been established.
A. He should contact the client's former investment advisor to find out the appropriate investment action based on previously-used guidelines.
B. He should invest the proceeds in cash equivalents until a meeting can be arranged to establish fund objectives.
C. He should make no decision until client objectives have been established.
User Contributed Comments 11
| User | Comment |
|---|---|
| danlan | Cash equivalent is the way to preserve value |
| ashok1959 | why can notbe invested asper current asset allocation strategy? |
| bobert | strategies may have changed or shifted. Say those maturing bonds were scheduled to mature at this time because the money would begin to be used as income benefits for retirees. Without finding out the objectives currently enforced it is always better to be safe than sorry. |
| StanleyMo | yeah, instead of leaving money aside, why don't use some for investment. |
| studyprep | Leaving cash! under normal circumstances, has negative future value. Here the safest way, and to avoid or minimize negative future value, is to invest in cash equil. Also note that without having client's objective Portfolio Manager cannot invest in other higher risky securities. |
| studyprep | oops, not the negative future value. I mean, return on the cash sitting on the table is negative. Which is not suitable. And you can not take riskier position because you do not have current KYC info yet. danlan and bobert had good responses. |
| Crown01 | nice question |
| dblueroom | good question. |
| wtwaf | great qn |
| raffrobb | Cash is King...best course of action until clients objectives, risk, and constraints can be determined. Seems like the best ethical response. |
| marianne1 | Keep Money liquide - so in cash - but don't wait |
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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® 2024 Level I Curriculum, Volume 6, Module 3.