1.

Erin Toffler, a portfolio manager at Esposito Investments, manages the retirement account established with the firm by her parents.

Whenever IPOs become available, she first allocates shares to all her other clients for whom the investment is appropriate; only then does she place any remaining portion in her parents account, if the issue is appropriate for them. She has adopted this procedure so that no one can accuse her of favoring her parents.

Which of the following is true?

Toffler has a duty to treat all clients equally regardless of personal relationships

Toffler should not act for family members as this puts her in a conflicted position

Toffler successfully avoids disadvantaging other clients with this approach

Toffler should not allow personal relationships to influence the way she conducts business and in addition must comply with her firms policies on personal transactions (e.g. preclearance procedures)

2.

In a regular meeting with client Seth Jones, the portfolio managers at Blue Chip Investment Advisors are careful to allow some time to review his current needs and circumstances.

In doing so, they learn that some significant changes have recently taken place in his life. A wealthy uncle left Jones an inheritance that increased his net worth fourfold, to US$1,000,000.

What should Blue Chip Investment Advisors do?

While Jones financial circumstances have changed, his investment objectives may not have and no further action is required unless requested

As Jones financial circumstances have changed, his investment advisors must change his portfolio to include high-risk, high-return securities

As Jones financial circumstances have changed, his investment advisors must update his investment policy statement

As Jones financial circumstances have changed, his investment advisors may wish to update his investment policy statement but are not obligated to do so