微信扫一扫
实时资讯全掌握
| Jake Schmidt Case Scenario
Jake Schmidt, CFA, has worked as a separate accounts manager at Bremen Investment Advisors, a large national asset management firm, for the past 10 years. Bremen offers separately managed accounts that meet the needs of its institutional and individual investors; each separate account is tailored to the client's objectives, risk tolerances, and tax situation.
Schmidt manages portfolios for a broad range of clients, from individual investors to large institutional investors. Several of his largest clients have sufficiently large portfolios that when trades are placed they will often move share prices. In order to avoid negatively impacting his smallest clients, when he trades a particular security for a number of different accounts, Schmidt executes trades in increasing order of size: trades are executed for the smallest accounts first, and the largest institutional investors last.
Schmidt sometimes receives an allocation of oversubscribed initial public offering shares, though often he does not receive enough shares to allow all eligible clients to participate. Rather than distributing an equal number of shares to each client, Schmidt’s procedures result in the eligible client with the largest portfolio receiving the greatest number of shares, while smaller clients receive proportionally fewer shares.
Schmidt provides portfolio performance information to his clients only quarterly. However, for clients who pay an additional annual fee, Schmidt provides monthly performance reports. Schmidt commits to all customers that they will receive performance reports "2 to 3 weeks after the end of the period."
New client DeShawn Jackson contacts Bremen to open an account. Schmidt agrees to manage this account, which represents about one-fifth of Jackson’s total wealth. As part of the IPS process, Schmidt asks Jackson to disclose details of Jackson's personal financial situation; particularly allocations and balances of investments held with other asset managers. Schmidt proposes to Jackson that the two have a conference call at the beginning of each February to review Jackson’s IPS.
Schmidt takes on Jackson, with a mandate to invest in the common stock of U.S. companies. Schmidt initially invests most of the value of the account in stocks in shares of companies in the basic materials sector. However, at the beginning of the next quarter Schmidt’s research about the prospects of basic materials stocks makes him nervous and he reallocates the majority of the portfolio to shares in consumer staples companies. Unfortunately, basic materials stocks perform strongly for the remainder of the quarter, while consumer staples sag, resulting in the account suffering a 2% loss for the quarter. When Jackson notices the shift in sector holdings in his statements at the end of the quarter, he is upset that his portfolio missed the run-up in prices in the basic materials sector.
In order to give clients additional confidence, Schmidt decides to have the portfolio information that he provides to clients reviewed on a regular basis for accuracy and completeness. Rather than hiring staff, Schmidt outsources this function to an outside organization.
One of Schmidt’s largest clients, Kiara Williams, has asked Schmidt to sell a very large block of her share holdings in Alpha Corporation, a small niche firm in the biotech industry. Schmidt refrains from initiating sales of Alpha Corporation stock for his other clients. However, he starts to feel downbeat about the prospects of stock of other firms in this niche. He subsequently decides to sell some other clients’ holdings in Beta Company which Williams does not own and other than being in the same biotech niche, Alpha Corporation and Beta Company are entirely unrelated.
Are Schmidt’s actions related to the creation and review of DeShawn Jackson’s IPS in compliance with the recommendations and requirements of the Asset Manager Code of Professional Conduct? A. No, with respect to the frequency of reviewing the IPS with Jackson. B. No, with respect to his request for Jackson to disclose assets held with other managers. C. Yes. |