Guard Against Portfolio Manager Risks

BC

A sound portfolio statement is a crucial tool that can help protect a client against a portfolio manager's potential mistakes, inappropriate investment, or unethical behavior. A portfolio statement is a comprehensive report that provides a detailed overview of a client's investment holdings, performance, and other relevant information.

The answer to the question is (B) Inappropriate investment.

A portfolio manager has a fiduciary duty to act in the best interest of their clients and to manage their portfolios prudently. However, portfolio managers are not infallible, and they can make mistakes, such as investing in securities that are not suitable for a particular client's investment objectives or risk tolerance.

A sound portfolio statement can help identify inappropriate investments and provide evidence that the portfolio manager did not act in the client's best interest. By regularly reviewing their portfolio statement, clients can monitor their investments and alert their portfolio manager to any issues that need to be addressed.

In addition, a sound portfolio statement can also help protect a client against unethical behavior by a portfolio manager. For example, if a portfolio manager engages in fraudulent activity, a client can use their portfolio statement to provide evidence of the fraudulent behavior to regulators or law enforcement agencies.

Overall, a sound portfolio statement is a critical tool that can help protect clients against inappropriate investments, unethical behavior, and other potential risks associated with investing.