Standard III (C) - Suitability

Before making an investment recommendation or action, the members must reasonably enquire into the client’s investment experience, his risk/return objectives, and any limitations.
Before making an investment recommendation or action, the members must determine that the investment being advised is suitable for the client in terms of the client’s objectives, financial goals, and limitations.
The member must also ascertain whether the investment being recommended is suitable in context of the client’s overall portfolio.

Examples of Violation

Example 1: An investment manager recommends two different clients with different risk profiles the same portfolio allocation.
Example 2: An investment manager learns that one of his client’s financial situation has changed as he lost lots of money in his business. This affects the client’s investment objectives but the investment manager does not update his investment policy statement to reflect the change objectives.
Example 3: For a particular high-income mutual fund, an investment manager decides to purchase a growth stock. This is against the fund’s investment mandate.

Before making an investment recommendation or action, the members must reasonably enquire into the client’s investment experience, his risk/return objectives, and any limitations.
Before making an investment recommendation or action, the members must determine that the investment being advised is suitable for the client in terms of the client’s objectives, financial goals, and limitations.
The member must also ascertain whether the investment being recommended is suitable in context of the client’s overall portfolio.

Examples of Violation

Example 1: An investment manager recommends two different clients with different risk profiles the same portfolio allocation.
Example 2: An investment manager learns that one of his client’s financial situation has changed as he lost lots of money in his business. This affects the client’s investment objectives but the investment manager does not update his investment policy statement to reflect the change objectives.
Example 3: For a particular high-income mutual fund, an investment manager decides to purchase a growth stock. This is against the fund’s investment mandate.