Answer-first summary for fast verification
Answer: No, Murphy did not violate any Standards.
Murphy did not violate **Standard V(B)**, *Communication with Clients and Prospective Clients*, as she used reasonable judgment to disclose the known risks and investment rationale at the time of the decision. The appropriateness of risk disclosure is assessed based on information available *ex ante* (at the time of the action). Members are not required to disclose risks they are unaware of. Additionally, Murphy did not violate **Standard V(A)**, *Diligence and Reasonable Basis*, as she provided a reasonable and adequately researched basis for the investment. While the unforeseen acquisition revealed a gap in research, it does not constitute a violation of the Standard.
Author: LeetQuiz Editorial Team
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Stella Murphy, CFA, a portfolio manager, meets with a client concerned about a security recently added to the portfolio. Murphy reviews the investment rationale and associated risks with the client. Subsequently, the company announces an unexpected acquisition in an unrelated industry, causing the stock to decline sharply. The client accuses Murphy of inadequate risk disclosure. Murphy explains the acquisition was unforeseen and not part of the initial analysis. Did Murphy likely violate any CFA Institute Standards?
A
No, Murphy did not violate any Standards.
B
Yes, Murphy violated the Standard related to communication with clients.
C
Yes, Murphy violated the Standard related to diligence and reasonable basis.
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