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发表于 2012-3-19 13:44
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Mike Johnson, who is sitting for Level III of the CFA exam this year, is a junior consultant at a small investment advisory firm. Julie Gowan, CFA, is Johnson’s supervisor and in the last three months had been letting Johnson develop a clientele. Johnson had met Mrs. Campbell two months earlier as a referral from an existing client: Mrs. Smith. Following his recent second visit with Mrs. Campbell, Johnson gave Campbell a personal data form to complete and return. The purpose of the form was to gather information about Campbell’s financial situation, investment experience, and investment objectives. Upon receiving the completed form in the mail, Johnson had his assistant, who is a CFA Level I candidate, type up the information. Johnson then reviewed the information and determined that he needed to call Campbell to clarify several items and to request more information.When Campbell answered the phone and Johnson identified himself, Campbell immediately asked if Johnson was still confident in the firm’s recommendation to buy shares of Brown Company, which Smith had purchased upon the firm’s recommendation three months earlier. The rapid rise of the stock of Brown Company after the recommendation, Campbell added, was the reason Campbell wanted to meet with a representative of Johnson’s firm. Johnson quickly did a search on his computer and found the buy recommendation on Brown Company that had been sent to Smith and other clients. Johnson then remembered that some of the clients, who were his friends, had been very happy with the stock’s performance. Johnson responded to Campbell by saying that purchasing the stock was a good idea.
Johnson then asked for a few details concerning Campbell’s situation, and Campbell answered some questions over the phone. Some of the information was not at her fingertips, so she promised to mail it to Johnson.During the phone conversation, Campbell stated that it is extremely important that the information she is providing to Johnson be considered confidential for several reasons. First, as a result of a lawsuit from a former neighbor, Campbell needs to hide some assets to avoid paying a judgment. Therefore, she wants to open up two separate accounts; a small one in her name, and a second account in the name of the company that Campbell owns. Second, Campbell told Johnson that she is about to file for divorce from her husband and does not want her husband to know about the accounts. After collecting all the information he needed, Johnson visited with Gowan to ask advice about opening the account in the name of Campbell’s company. Gowan told Johnson that Campbell should open the account in the name of a fictitious company instead of using the name of Campbell’s company. This would make it more difficult for the courts to find the assets. However, the supervisor stated, "You realize that opening an account in the name of a fictitious firm is illegal so I cannot suggest that you do it. I am only saying that, if you did this, it would help Campbell accomplish her objective."
Later that day, Johnson went to a restaurant and met his old college roommate, William Black, who is now a divorce attorney. Johnson told Black all about Campbell’s situation and suggested that, if Black needs a new client, he should contact Campbell who is about to divorce her husband. Black said he could not act on the information because Campbell’s husband had seen him already about a possible divorce. Johnson assured Black that, as they had agreed, he did not tell Campbell about the possibility of Johnson passing her name on to Black. Black thanked Johnson for the lead and said that, thanks to Johnson’s referrals, he currently had more clients than he could handle anyway. Despite that, Black paid for the dinner as he usually did when Johnson gave him a good lead. Did Johnson violate the Code and Standards by telling Black about Campbell’s impending divorce? A)
| No, because Black is not going to act on the information. |
| B)
| Yes, he violated client-member confidentiality. |
| C)
| No, because the impending divorce had nothing to do with Campbell’s financial situation. |
|
Johnson violated Standard III(E), which states that all information about current and former clients and prospects must be kept confidential. The fact that Black does not act on the information, and that Black already knew that Campbell and her husband were having marital problems is irrelevant. Although the impending divorce had nothing to do with Campbell's financial situation, this information was clearly communicated to Johnson "within the scope of the client-member relationship." (Study Session 1, LOS 2.a,b)
Did Johnson violate the Code and Standards by the way he gathered information from Campbell using the personal data form? A)
| No, he did not violate the Code and Standards by the way he gathered information. |
| B)
| Yes, because he failed to collect the information during face-to-face contact. |
| C)
| Yes, because he permitted his assistant who does not hold the CFA designation to see this confidential information. |
|
There is no provision that would prohibit Johnson from gathering information through the mail,nor is there a provision prohibiting employees of an investing management firm from working with confidential client information. (Study Session 1, LOS 2.a,b)
In his recommendation of Campbell buying the shares of Brown company, Johnson violates the Code and Standards concerning: A)
| Standard III(C) Suitability but not Standard V(A) Diligence and Reasonable Basis. |
| B)
| both Standard III(C) Suitability as well as Standard V(A) Diligence and Reasonable Basis. |
| C)
| Standard V(A) Diligence and Reasonable Basis but not Standard III(C) Suitability. |
|
Although Johnson’s firm had made the recommendation three months earlier, he obviously had not been directly involved in the recommendation, nor did he check to see if any new information had been gathered on Brown Company. This is a violation of Standard V(A). Since the client profile was still incomplete at the time of the recommendation, Johnson did not know if Brown Company was suitable for Campbell. The stock had obviously gone up in value since the last recommendation and thus it may not have much capital gain potential left. This is a violation of Standard III(C). (Study Session 1, LOS 2.a,b)
Did Johnson's supervisor violate the Code and Standards when she told Johnson about a more effective way to hide assets? A)
| No, because the supervisor specifically stated that, "I cannot suggest" that you open an account in the name of a fictitious firm. |
| B)
| No, because the supervisor did not take specific action that violated the law. |
| C)
| Yes, because the supervisor assisted in an apparent violation of law. |
|
Johnson's supervisor violated the Code and Standards when she told Johnson about a more effective way to hide assets. Standard I(A), Knowledge of the Law, states that "members shall not knowingly participate or assist in any violation of such laws..."Giving information about which illegal act will most benefit Campbell falls into this category. Stating that "I cannot suggest doing this," does not avert blame from the supervisor. She has assisted in the violation of the law by suggesting how best to break the law. Also, there is no confidentiality relationship between investment professionals and their supervisor. (Study Session 1, LOS 2.a,b)
Which of the following is a violation of the Code and Standards? A)
| Johnson having the assistant type up Campbell’s information. |
| B)
| Black paying for the dinner with Johnson. |
| C)
| Johnson gathering information over the phone. |
|
Apparently Johnson has been referring many clients to Black, a practice Johnson hides from the clients, and the dinners Black has paid in return would qualify as a benefit received by the member or delivered to others for the recommendation. This violates Standard VI(C) Referral Fees and Standard III(E) Preservation of Confidentiality. None of the other circumstances listed violate the Code and Standards. (Study Session 1, LOS 2.a,b)
Is Johnson in violation of the Code and Standards if he informs the legal authorities that Campbell is attempting to hide assets from the courts? A)
| No, because Campbell has done something illegal. |
| B)
| Yes, because he would be violating client-member confidentiality. |
| C)
| Yes, because Johnson has only hearsay information about illegal activity and he would need written documentation to justify notifying the legal authorities. |
|
Johnson is not in violation of the Code and Standards if he informs the legal authorities that Campbell is attempting to hide assets from the courts, because Campbell has done something illegal. According to Standard III(E), the rules of confidentiality do not apply when a member receives information concerning illegal activities. (Study Session 1, LOS 2.a,b) |
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