CFA Level 1: Duty of Loyalty for Pension Plans and Trusts

Duty of Loyalty for Pension Plans and Trusts

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Question

When a manager is responsible for the portfolios of pension plans or trusts, the duty of loyalty is owed to the ________.

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A. B. C. D. E. F. G.

C

The first step in fulfilling a fiduciary duty is to determine what the responsibility is and to who it is owed. Members should take particular care in determining the identity of the "client" to whom the duty of loyalty is owed. In the context of an investment manager managing the portfolios of pension plans or trusts, the client is not the person or entity who hires the manager but, rather, the beneficiaries of the plan or trust. The duty of loyalty is owed to the beneficiaries.

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