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A portfolio manager and a client are developing an investment policy statement (IPS). The client works as an auditor for a public accounting firm that has a policy prohibiting its employees from investing in companies the firm audits. This restriction is most appropriately:

A listed in the IPS as a constraint

Restrictions on particular investment choices must be listed in the constraints section of the IPS. This investor must abide by his employers policies, which is an example of a legal and regulatory factor. The appendix to an IPS usually lists items such as the rebalancing policy and strategic asset allocation that might change more frequently than a constraint.