Answer-first summary for fast verification
Answer: A public company director's prohibition from trading the company's stock before financial results are released.
**Explanation:** - **Option A** is incorrect because the pension fund's restriction on real estate investments is driven by internal policy rather than external legal or regulatory requirements. The term 'decision' indicates it is not a mandatory constraint. - **Option B** is incorrect because the avoidance of interest-generating securities by a taxable investor is motivated by tax considerations, which fall under the tax concerns section of the IPS, not legal and regulatory constraints. - **Option C** is correct because directors of public companies are legally restricted from trading company stock based on material nonpublic information, especially before financial results are published. This constraint must be explicitly noted in the IPS to prevent inadvertent violations by the portfolio manager. This question aligns with the CFA curriculum's focus on understanding investment constraints, including legal and regulatory factors, in portfolio management.
Author: LeetQuiz Editorial Team
Ultimate access to all questions.
Which of the following scenarios most likely represents a legal and regulatory constraint in an investment policy statement (IPS)?
A
A pension fund's restriction on investing in real estate due to internal policy.
B
A taxable investor's preference to avoid securities generating interest income for tax efficiency.
C
A public company director's prohibition from trading the company's stock before financial results are released.
No comments yet.