Financial Conduct Authority (FCA) UK Regulation Sample Exam

What must a portfolio manager provide to a client in relation to executing orders?

1. Personal investment insights

2. Confidentiality agreements

3. Appropriate information regarding its execution policy

4. Alternative investment options

The correct answer is: Appropriate information regarding its execution policy

A portfolio manager is required to provide clients with appropriate information regarding its execution policy to ensure transparency and effective communication about how orders are executed. This aspect of the relationship is crucial because it informs clients about the strategies and processes the portfolio manager will employ to execute orders on their behalf. Understanding the execution policy helps clients assess whether the execution practices align with their interests, expectations, and regulatory requirements. It includes details on how the manager seeks to achieve the best possible results for clients and outlines any potential conflicts of interest or considerations in the execution process. This is particularly important in maintaining trust and compliance within the financial regulatory framework, such as the requirements set forth by the Financial Conduct Authority (FCA). The other answer options do not pertain specifically to the obligations of a portfolio manager regarding order execution information. For instance, personal investment insights might be valuable but do not fulfill the regulatory requirement about execution policies. Confidentiality agreements are important for client privacy but not directly related to the execution of orders. Alternative investment options could provide diversification ideas but do not address the specifics of how and when orders will be executed.