Is Basch correct or incorrect with regard to her statement about the five required fiduciary standards and her statement about the duty to delegate investment authority?

A potential client contacted an employee and wanted detailed performance records of client accounts so he can decide whether to invest with the firm."

Basch goes on to say that she is responsible for developing a presentation on the differences between the Prudent Investor and the Prudent Man rules for managing trust portfolios. Basch explains to Cooken that the Prudent Investor rule requires a trustee to exercise five fiduciary standards in managing the assets of a trust account, including care, skill, caution, loyalty, and impartiality. She states that although there are many differences between the Prudent Man and the newer Prudent Investor rule, one element of continuity is the duty of the trustee to delegate investment authority in the event that the trustee lacks sufficient investment knowledge.

Toward the end of the lunch meeting, Basch suggests that in exchange for research published by Cooken and Khasko, Basch can have portfolio managers at her firm send clients that are too small for their firm to Khasko. Since Khasko specializes in clients with smaller portfolios, the arrangement sounds like a good idea to Cooken. Cooken tells Basch that she will think the arrangement over and get back with her next week with a decision.

Is Basch correct or incorrect with regard to her statement about the five required fiduciary standards and her statement about the duty to delegate investment authority?
A . Incorrect about fiduciary standards only.
B . Incorrect about delegation of authority only.
C . Incorrect about fiduciary standards and delegation of authority.

Answer: B

Explanation:

The five general fiduciary standards for a trustee that carry over from the old Prudent Man Rule to the new Prudent Investor Rule arc care, caution, impartiality, loyalty, and skill. The ability to delegate investment authority is a new feature of the Prudent Investor rule that was prohibited under the Prudent Man rule. (Study Session 2, LOS 10-c)

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