You have a new client, it is time to make investment decisions and you want to reduce professional liability exposure; what should be created for each client?
Explanation
Answer: D - To avoid professional liability exposure with a new client, an investment policy statement must be created. This policy creates a structure for making investment decisions and managing the investor’s portfolio. It establishes risk and return objectives. It determines constraints: time horizon, tax consequences, liquidity needs, regulations, and unique client needs. It establishes a standard of agreed-upon goals and other criteria’s against which investment performance can be measured. And it provides the documentation to reduce professional liabilities showing prudent procedures were followed while making investment decisions.
