A bond portfolio manager approved only one below-investment-grade bond for a client with an investment-grade mandate, then added several more below-investment-grade bonds without client approval. This action most likely violated which CFA Institute Standard of Professional Conduct?

• A. Suitability
• B. Communications with Clients
• C. Independence and Objectivity
• D. Loyalty, Prudence and Care

Answer: (A)

Suitability is about making sure every investment decision fits the client’s objectives, constraints, and risk tolerance. In this case, the client has an investment-grade mandate, so the portfolio should remain within the level of credit risk that aligns with that mandate. Approving one below-investment-grade bond may already push the risk beyond what was authorized, and adding several more without explicit client approval fundamentally changes the portfolio’s risk profile. That misalignment with the client’s stated mandate is a breach of suitability, because investments must be appropriate for what the client agreed to. The other standards address different aspects (how you communicate, independence, and prudent, loyal conduct), but they don’t directly capture the failure to follow a client’s specified mandate like suitability does.