Ethical and Professional Standards Q70

70Ankit Tivari, CFA, is an investment adviser who works for Best Securities. He has two clients: Raveena Ahisma, a 55 year-old widow with two college going children, and Agneya Adya, a 35-year old journalist who works for a local newspaper. Both her clients are employed and earn a substantial salary. Adya is very aggressive with his investments and wants to invest in high risk securities for a higher return, whereas Ahisma wants to invest in low risk, large cap securities to achieve a constant income for her children‟s education. Tivari recommends investing a quarter of their portfolios in derivatives that have a potential to earn high returns despite their volatility. Did Tivari violate any Standard while choosing investments for his clients?

Option : B
Explanation : Tivari has violated Standard III(C) Suitability by not identifying the risks and objectives of Ahisma and selecting an aggressive investment for both clients which is only suitable for Adya, since the two clients have different financial objectives and circumstances

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