We agree with the proposed “Know Your Client” statements. The CFA Code of Ethics and Standard of Professional Conduct Standard III – Duties to Clients includes Section A. Loyalty, Prudence, and Care as well as Section C. Suitability. Standard V – Investment Analysis , Recommendations and Action requires that CFA charterholders and CFA Institute members be diligent in their communication requirements. Therefore we believe that an advisor has a duty to be aware of all material client information that is used as the basis for his/her investment recommendations and actions. However, it is also the duty of the client to inform the advisor of material facts or a change in material facts that may impact their investment policy and risk analysis.
Overview of the Council’s Comments:
We believe that this duty relates to the investment suitability for both managed and advisory clients. Transaction only investors who have signed waivers that they do not want advice may not fall under this duty, however, if they also hold an advisory account it would be ethical to make reference to suitability.