Loyalty, prudence and care

UNDER the CFA Institute's 'Loyalty, Prudence, and Care' Standard of Practice, "members of the professional body have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment. Members must act for the benefit of their clients and place their clients' interests before their employer's or their own interests".

To illustrate what loyalty, prudence and care apply to, we look first at real estate investment trusts, in which investors pool their funds together to invest in a portfolio of income-generating real estate.

These investment vehicles are managed by a Reit manager, whose role is to strategise and grow rental income through enhancements and/or accumulate additional units to increase dividend per unit (DPU) of the Reit stock for the benefit of investors.