In ethics, the problems often mention these 2 types of accounts, how different are they? how differently a CFA memeber or candidate should handle them? What kind of problems could appear in exam on these 2 types of accounts? Thanks.
If you are a portfolio manager and you want to buy or sell something in a non-discretionary account you need to call the client first and confirm that is what they want to do. In a discretionary account, you just buy or sell whatever you want and tell the client later. Suitability comes into play quite a bit with discretionary accounts. Just because you are able to buy and sell anything you want without confirming with the client does not mean the investments are suitable for the client or meet their stated investment policy. In either case you need to act in your clients best interest. That can be informing the client of risks they face for a specific investment they are considering as in a non-discretionary account or thinking of the clients investment policy before you buy that risky investment for a discretionary account. You also do not want to favor discretionary accounts over non-discretionary accounts. So if an IPO comes across your desk you need to give all of your accounts an equal chance to participate.
Thank you wonderfulcfa. Thank you so much
wonderfulcfa LOL
Your lucid ways of explaining things truly amazes me - wanderingcfa!! Thanks for this. I am not into Ethics yet, so any ethics thread is a top-up knowledge for me!
“wonderfulcfa” !!! …thanks…I had a slight idea about these accounts…but now its crystal clear…
Glad it helps. If only I could explain quant and derivatives…oh well, back to the books.