Final answer:
Investing in derivatives is not inherently a source of fiduciary liability unless it is imprudent or not in the best interests of beneficiaries, unlike failure to adhere to terms or failure to conduct asset reviews (b).
Step-by-step explanation:
The question you've asked is related to fiduciary liability, which occurs when a fiduciary fails to act responsibly in the best interests of their beneficiaries. Among the given options, investing in derivatives by itself would not necessarily be a source of fiduciary liability. Fiduciaries are expected to adhere to the terms of the governing instrument (failure to adhere) and conduct periodic asset reviews (failure to conduct) as part of their duty.
Derivatives can be a part of a properly diversified and prudently managed portfolio, so investing in them is not inherently a breach of fiduciary duty. However, if the investment in derivatives is imprudent, speculative, or not aligned with the terms of the governing instrument or the interests of the beneficiaries, it could lead to fiduciary liability.