Scenario: A firm withholds material information about a fund’s holdings from clients until after a transaction is executed. Which CFA Institute Standard is violated?

• A. Standard V.A Diligence and Reasonable Basis
• B. Standard V.B Communication with Clients and Prospective Clients
• C. Standard IV.C Suitability
• D. Standard VI.A Disclosure of Conflicts

Answer: (B)

Material information must be shared with clients in a fair and timely way, so they can make informed investment decisions. Withholding details about a fund’s holdings until after a transaction is executed deprives clients of critical information about what they are actually buying, the fund’s risk exposures, and how the investment fits their objectives. That kind of omission is a failure in communication with clients and prospective clients, which violates the requirement to provide complete, accurate, and timely disclosures. The issue isn’t primarily about the research or the client’s suitability of the investment, or about conflicts of interest, but about how information is conveyed and whether material facts are being disclosed openly. Therefore, this scenario breaches Standard V.B. Communication with Clients and Prospective Clients.