David Bravoria, CFA, recommends high-risk venture capital funds to a client after two years of no contact and sends monthly investment statements. Did Bravoria most likely violate CFA standards?

• A. A No
• B. B Yes, with regard to investment statements
• C. C Yes, with regard to purchasing venture capital funds
• D. D Not specified

Answer: (C)

The key issue is suitability and due care in recommendations. A CFA charterholder must ensure any investment suggested aligns with the client’s current objectives, risk tolerance, liquidity needs, and financial constraints, which requires up-to-date information about the client.

After two years with no contact, Bravoria has not obtained fresh information about the client’s situation. Recommending high-risk venture capital funds in this context is inappropriate because those investments are illiquid and carry substantial risk, and the client’s ability to absorb losses or meet liquidity needs may have changed. Without confirming the client’s current risk tolerance and constraints, the recommendation cannot be considered suitable.

Sending monthly investment statements does not by itself establish or maintain suitability; statements inform but do not substitute for an ongoing process of understanding the client. Therefore, the action most likely violates CFA standards with regard to suitability and the duty to act with due care.