What are the duties to clients under Standard III? Especially suitability and fair dealing.

Standard III is arguably the most heavily tested ethics standard because it directly impacts the client relationship. Here's each sub-standard:

Standard III(A) — Loyalty, Prudence, and Care:

Act in the client's best interest with the care a prudent person would exercise. You are a fiduciary (or must act as if you are).

• Client interests come BEFORE your firm's interests or your own
• Voting proxies in the client's best interest
• Maintaining soft dollar arrangements that benefit clients

Standard III(B) — Fair Dealing:

Deal fairly and objectively with all clients when providing investment analysis, recommendations, and actions.

• "Fair" does NOT mean "equal" — larger institutional clients may receive different service levels, but all clients should receive the same recommendation at approximately the same time
• When issuing a new recommendation, disseminate to all clients simultaneously
• Do NOT favor one client over another when allocating IPO shares

Standard III(C) — Suitability:

You must understand the client's financial situation, investment experience, and objectives BEFORE making any recommendation.

Standard III(D) — Performance Presentation:

Present performance fairly, accurately, and completely. Don't cherry-pick time periods or accounts.

Standard III(E) — Preservation of Confidentiality:

Keep client information confidential UNLESS:

1. The client gives consent to share
2. Required by law (e.g., subpoena, regulatory investigation)
3. The client is engaged in illegal activity

Practical Example:

Tanaka manages portfolios for 40 clients. She discovers an attractive small-cap stock and allocates it only to her three largest clients. This violates Fair Dealing — all clients for whom the stock is suitable should have received the opportunity.

Exam tip: Standard III questions often describe a scenario where the analyst has good intentions but still violates the standard. Focus on what the standard requires, not whether the analyst meant well.

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