Ronald,
He didn't specifically say he was replacing only for empty policy.group_code. If he wants all records updated with the current client.Group_code, your second example would work without the "AND EMPTY...." part.
>SELECT Client
>SET ORDER TO TAG SSNumber
>SCAN
> REPLACE Group_Code WITH Client.Group_Code IN Policy ;
> FOR Policy.SSNumber = Client.SSNumber AND EMPTY(Policy.Group_Code)
>ENDSCAN