Suitability

What it means

The requirement to judge an investment against the client’s objectives, constraints and circumstances before recommending or making it.

The exam angle

For a portfolio the test is the effect on the total portfolio, not the merits of the security in isolation.

Where it appears in the syllabus

• Ethical & Professional StandardsCFA Level I · exam weight 10–15% · The Code, the seven Standards, and how examiners phrase violations.
• Ethical & Professional StandardsCFA Level III · exam weight 10–15% · The Standards plus the Asset Manager Code — which appears only at Level III.
• Portfolio ConstructionCFA Level III · exam weight 15–20% · Equity and fixed-income portfolios, alternatives, institutions, trading costs.

Related terms

• Code of EthicsThe aspirational statement of how members and candidates should conduct themselves.
• Fiduciary dutyThe obligation to act in another party’s interest ahead of your own, with the care and loyalty that relationship…
• Standards of Professional ConductThe seven enforceable standards covering professionalism, integrity of capital markets, duties to clients, duties to…
• CompositeAll portfolios managed to the same strategy or objective, grouped together for GIPS reporting.
• Diligence and reasonable basisThe requirement that any recommendation or action rest on adequate research and analysis that could be defended if…
• Fair dealingTreating all clients fairly when disseminating recommendations or taking investment action.