Chartered Investment Manager (CIM) Practice Exam · Question
If a portfolio manager engages in 'churning' a client's account, what fiduciary duty are they violating?
Churning involves excessive trading in a client's account, primarily to generate commissions for the manager or firm, rather than for the client's benefit. This
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Question: If a portfolio manager engages in 'churning' a client's account, what fiduciary duty are they violating?
Answer options:
- Duty of confidentiality. ✅ Duty of care and loyalty (suitability).
- Duty to report promptly.
- Duty of fair dealing.
Correct answer: Duty of care and loyalty (suitability).
Explanation: Churning involves excessive trading in a client's account, primarily to generate commissions for the manager or firm, rather than for the client's benefit. This directly violates the duty of care and loyalty, as it puts the manager's interests ahead of the client's and is unsuitable.
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