Responsibilities to Employers in Investment Decisions

Hard Professional Standards Application Responsibilities To Employers

As a CFA charterholder working as a portfolio manager at a large investment firm, you are approached by a client who requests you to invest a remarkable portion of their portfolio in a specific technology stock. The client also mentions that this might be an opportunity for quick gains and urges you to act without delay. However, you are aware that this stock is currently overvalued and does not fit the investment strategy your firm has set for its clients. Moreover, your firm has a policy against investing more than 5% of a client's portfolio in any one stock.

Your senior manager also emphasizes the importance of adhering to the firm’s investment guidelines. How should you respond to the client’s request while upholding your responsibilities to your employer?

Agree to invest in the stock as requested by the client, since client satisfaction is the primary concern.

Explain to the client the investment strategy of the firm and advise against the investment while offering alternative options.

Invest in the stock with the majority of the client's portfolio but decrease the allocation to other investments to accommodate the risk.

Hint

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