Our firm manages client portfolios on a discretionary basis. Can we answer “yes” to Item 11 if we consider Y2K issues only when we buy a new security for our clients?
No. Advisers having discretionary authority over client assets typically undertake to provide their clients with ongoing management services, which includes consideration of the advisability of buying, selling and continuing to hold securities and other assets. Thus, an adviser’s fiduciary as well as its contractual obligations may require it to review client portfolios to evaluate the impact of Y2K preparedness of the issuers of the securities held in the portfolio and the advisability of continuing to hold those securities. This obligation is no different than the obligation of an adviser to evaluate any other material factor bearing on whether the client should sell, purchase or continue to hold securities.
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