Question
The manager of a discretionary account places client funds in a suitable investment because it provides a higher commission than alternatives that are also suitable
The manager of a discretionary account places client funds in a suitable investment because it provides a higher commission than alternatives that are also suitable for the client. The selected investment subsequently appreciates in value. This investment manager did not:
- place the client’s interests first.
- face an ethical dilemma because the investment was profitable.
- have a conflict of interest because the investment was suitable for the client.
Step by Step Solution
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The detailed answer for the above question is provided below The correct answer is placed the clients interests first Explanation Even though the investment appreciated in value the manager prioritized receiving a higher commission over prioritizing the clients best interests This constitutes a breach of fiduciary duty which requires that the manager acts solely in the clients best interesteven if it means earning a lower commission Heres a breakdown of why the other options are incorrect Not placing the clients interests first The manager acted in their own selfinterest by choosing the investment with the higher commission regardless of whether it was the best option for the client ...
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Management Accounting
Authors: Will Seal, Carsten Rohde, Ray Garrison, Eric Noreen
6th Edition
0077185536, 978-0077185534
