A portfolio decision is made that conflicts with a client's stated risk tolerance to increase fees. Violation?

• A. Standard II.A Material Nonpublic Information
• B. Standard IV.A Loyalty, Prudence, and Care
• C. Standard VI.B Priority of Transactions
• D. Standard I.C Misrepresentation

Answer: (B)

A key requirement is to act with loyalty, prudence, and care—placing the client’s interests above your own and making decisions that fit the client’s stated objectives and risk tolerance. When a portfolio choice is made specifically to raise fees and conflicts with the client’s risk tolerance, that undermines the client’s interests and shows a lack of prudent consideration for risk management. The adviser has a fiduciary duty to align the strategy with what the client is willing to tolerate, not to pursue higher compensation at the client’s expense. This isn’t about misrepresentation, nonpublic information, or front-running; those issues would point to different standards. The essence here is breach of loyalty and prudent care to the client.