Standard III(C) cases: IPS, total portfolio and mandates

In short

• Before any recommendation or action, make a reasonable inquiry into experience, risk and return objectives and constraints. Recommending first and asking later is a breach.
• The IPS is the reference point: client identification, objectives, eight constraints and benchmarks. Judge each idea by its effect on the total portfolio.
• A risky holding can fit a portfolio, and a safe-looking one can fail the IPS (a lock-up fund in a liquid-assets mandate). Leverage and limited liquidity bear directly on suitability.
• Review the IPS at least annually and when something material changes: the client's wealth, family, health or liquidity, an institution's liabilities or withdrawals, or a requested change of strategy.
• Unsolicited unsuitable trade: pause, discuss, document. Small impact needs the client's acknowledgment; material impact needs an IPS update; an insistent client may force a decision about the relationship.
• Mandate managers owe consistency with the mandate. Execution-only staff and sell-side analysts may not judge suitability, and suitability can rest only on the information the client provided.