1215

Jacob Allen, CFA, decides he could make more money if he started his own company. Which of the following steps would NOT violate Standard IV(A), Loyalty to Employer?

A) Taking home the employer's buy lists.

B) Getting written permission from his employer to call the clients and solicit their business for his new firm.

C) Taking home his current employer's client lists, investment statements and marketing presentations.

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If Jacob gets written permission from his employer to solicit their clients (not likely, obviously) he would not be violating the Loyalty to Employer Standard.

1215

When a CFA Institute member who is presently employed by a firm undertakes any independent practice, he must do all of the following EXCEPT:

A) remand a percentage (to be determined by the employee and employer) of the income earned back to the employer.

B) disclose the expected duration of the services to be rendered.

C) secure permission from the employer.

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The member is obligated to get permission from his employer if he will be in any way competing with his current employer. They must provide notification to their employer describing the types of services to be rendered, the expected duration, and compensation for the services.

1215

Jack Salyers, CFA, is considering starting his own firm to compete with his current employer. He takes several actions before turning in his resignation. Which of the following actions is NOT in violation of Standard IV(A), Loyalty to Employer?

A) Jack copied the employer's computer models and other property.

B) Before leaving, Jack solicits his employer's current clients.

C) Jack told his employer that he was considering leaving and requested that the employer write him a letter of recommendation.

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Asking for a letter of recommendation is perfectly acceptable. Soliciting clients and taking the employer’s property like client lists, computer programs, etc. are not permissible.

1215

Pamela Gee is a portfolio manager. She is planning to establish her own money management firm. She has already informed her employer, Branford, Inc., about her plans. In her remaining time at Branford, she can:

A) solicit Branford colleagues but not Branford clients.

B) start the registration of her new company.

C) inform her current clients about her resignation and let them know how to reach her, in case any problems arise in the future.

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The only action that will not breach Standard IV(A) Loyalty to Employer, is to start the registration of her new company.

 

1215

Which of the following statements is most correct under the Code and Standards?

A) Consent from the employer is necessary to permit independent practice that could result in compensation or other benefits in competition with the member's employer.

B) CFA Institute members are prohibited from undertaking independent practice in competition with their employer.

C) Members are prohibited from making arrangements or preparations to go into competitive business before terminating their relationship with their employer.

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Members are not prohibited from making arrangements or preparations to go into competitive business before terminating their relationship with their employer. CFA Institute members are not prohibited from undertaking independent practice in competition with their employer provided they have consent from their employer. Members must provide notification to their employer describing the types of services to be rendered, the expected duration, and compensation for the services.

1215

An analyst belongs to a nationally recognized charitable organization, which requires dues for membership. The analyst has worked out a deal where he provides money management advice in lieu of paying dues. Which of the following must the analyst do?

A) Resign from the position because the relationship is a conflict with the Standards.

B) Nothing since he is not an employee of the charitable organization.

C) Must treat the charitable organization as his employer.

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An employee/employer relationship does not necessarily mean monetary compensation for services. If the analyst is performing services for the organization, then the analyst must treat the position as if he were an employee.

1215

Nick O'Donnell, CFA, unsuspectingly joins the research team at Wickett & Co., an investment banking firm controlled by organized crime. None of the managers at Wickett are CFA Institute members. Because of his tenuous situation at Wickett, O'Donnell begins making preparations for independent practice. He knows he will be terminated if he informs management at Wickett that he is preparing to leave. Consequently, he determines that "if he can just hang on for one year, he will likely have a client base sufficient for him to strike out on his own." This action is:

A) a violation of his fiduciary duties.

B) not a violation of his duty to employer.

C) a violation of his duty to disclose conflicts to his employer.

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O’Donnell is required to obtain consent from his employer if he is attempting to practice in competition with his employer. Merely undertaking preparations to leave, which do not violate a duty, is not a violation of the Code and Standards.

1215

Janet Thompson, CFA, is employed as an analyst by Nationwide Securities. According to CFA Institute Standards of Professional Conduct, which of the following statements about Thompson's duty to Nationwide is NOT correct? Thompson must refrain from:

A) making arrangements to go into a competitive business before terminating her relationship with Nationwide.

B) engaging in any conduct that would injure Nationwide.

C) engaging in independent competitive activity that could conflict with the business of Nationwide unless she receives written consent.

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Standard IV(A) permits Thompson to make preparations to go into a competitive business before terminating her relationship with Nationwide provided that such preparations do not breach her duty of loyalty.

1215

John Hill, CFA, has been working for Advisors, Inc., for eight years. Hill is about to start his own money management business and has given his two-week notice of his resignation from Advisors. A few days before his resignation takes effect, a former client of Advisors calls Hill at his home about his new firm. The former client says that he is very happy that Hill is leaving Advisors because now he and Hill can resume a professional relationship. The client says that he would never become a client of Advisors again. Hill promises to call the client back after he has left Advisors. Hill does not tell his employer about the call. Hill has most likely:

A) violated the Standard concerning disclosure of conflicts.

B) violated the Standard concerning loyalty to employer.

C) not violated the Standards.

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Based on the information here, Hill has done nothing wrong. He took a call at his home, presumably on his own time, and the client made it clear that he would never be a client of Advisors. Therefore, there was no breach of loyalty to Advisors by Hill, nor is there a conflict of interest.

1215

Grant Starks, CFA, has been working for Advisors, Inc., for eight years. Starks is about to start his own money management business and has given his two-week notice of his resignation. A few days before his resignation takes effect, a current client of Advisors calls him at his office to inquire about some services for her account at Advisors. During the conversation, Starks tells the client that his new business will have lower commissions than Advisors. Starks has most likely violated:

A) Standard IV(A), Loyalty to Employer, by competing with his current employer.

B) Standard VI(B), Priority of Transactions, by violating the priority of transactions.

C) none of these Standards.

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This is a breach of loyalty to his current employer. By telling a current client of his employer about the lower commissions he will charge in his new business, Starks is placing himself in direct competition with Advisors, and this is a violation of Standard IV(A).