a. Evaluate professional conduct and formulate an appropriate response to actions which violate the CFA Institute Code of Ethics and Standards of Professional Conduct.

b. Prepare appropriate policy and procedural changes needed to assure compliance with the Code of Ethics and Standards of Professional Conduct.

Q1. Benson & Company (BC) is a brokerage and investment advisory firm that specializes in venture capital. BC researches start-up companies for their clients and helps qualified startups raise money. BC often acts as a conduit for investors and firms needing start-up capital. Over the past ten years, of the venture capital opportunities for which BC has raised money, the proportion of successes is significantly higher than the average for BC’s peers. This fact appears in writing in most of BC’s promotional material. When approaching investors with venture capital deals, BC representatives have been instructed to say “we offer opportunities with a higher expected return than stocks without the extra risk.”

Ron Thornton, CFA, has just been promoted to the role of supervisor of research, with a specific charge to reorganize his division. Thornton begins with a review of the files. He decides to throw out all files pertaining to companies that had applied to BC for financing, but had been refused by BC. He also decides to throw out files on those firms that have been researched, but were not being recommended by BC.

Thornton asks Sue Fosler, a level III CFA candidate, to look at Spanish Garden, which is a new concept family-restaurant chain that is seeking venture capital from BC. He gives her a coupon for a complementary meal that had been sent to BC by the owners of Spanish Garden. Fosler goes to a local branch of the restaurant for the meal. While she is there, she sees Fred Benson enjoying a meal at the restaurant. Fred Benson is one of the Benson and Company partners. Later, she asks him about the restaurant, and he says “I like the food.” He added jokingly that “the American public will benefit from the growth of Spanish Garden.” Fosler also learns that Fred Benson is on the board of directors of Spanish Garden and owns two-percent of the company. Fosler continues gathering data and, based on the data and her opinion regarding her dining experience at the restaurant, concludes that a “buy” recommendation is appropriate. After writing up her report, she gives it to Thornton who will be responsible for disseminating the report. The next day Fosler discovers that the Center for Disease Control (CDC) has ordered Spanish Garden to change some of its food handling procedures. She calls the CDC, and a CDC spokesman informs her that the restaurant could be closed down unless it complies with these requests immediately. Fosler calls the head quarters of Spanish Garden and is told “no comment” by a restaurant representative. Fosler relays this information to Thornton before he disseminates Fosler’s recommendation. He disseminates the recommendation without any changes. Upon learning this, Fosler made arrangements to speak with BC’s legal counsel.

With regard to the written statement concerning the success of BC’s prior venture-capital investment offerings, and the verbal slogan concerning risk and return that BC’s representatives have been instructed to say to investors, which (if any) is a violation of the Code and Standards?

A)   The written statement only.

B)   Both statements are a violation.

C)   The verbal statement only.

答案和详解如下：

a. Evaluate professional conduct and formulate an appropriate response to actions which violate the CFA Institute Code of Ethics and Standards of Professional Conduct.

b. Prepare appropriate policy and procedural changes needed to assure compliance with the Code of Ethics and Standards of Professional Conduct.

Q1. Benson & Company (BC) is a brokerage and investment advisory firm that specializes in venture capital. BC researches start-up companies for their clients and helps qualified startups raise money. BC often acts as a conduit for investors and firms needing start-up capital. Over the past ten years, of the venture capital opportunities for which BC has raised money, the proportion of successes is significantly higher than the average for BC’s peers. This fact appears in writing in most of BC’s promotional material. When approaching investors with venture capital deals, BC representatives have been instructed to say “we offer opportunities with a higher expected return than stocks without the extra risk.”

Ron Thornton, CFA, has just been promoted to the role of supervisor of research, with a specific charge to reorganize his division. Thornton begins with a review of the files. He decides to throw out all files pertaining to companies that had applied to BC for financing, but had been refused by BC. He also decides to throw out files on those firms that have been researched, but were not being recommended by BC.

Thornton asks Sue Fosler, a level III CFA candidate, to look at Spanish Garden, which is a new concept family-restaurant chain that is seeking venture capital from BC. He gives her a coupon for a complementary meal that had been sent to BC by the owners of Spanish Garden. Fosler goes to a local branch of the restaurant for the meal. While she is there, she sees Fred Benson enjoying a meal at the restaurant. Fred Benson is one of the Benson and Company partners. Later, she asks him about the restaurant, and he says “I like the food.” He added jokingly that “the American public will benefit from the growth of Spanish Garden.” Fosler also learns that Fred Benson is on the board of directors of Spanish Garden and owns two-percent of the company. Fosler continues gathering data and, based on the data and her opinion regarding her dining experience at the restaurant, concludes that a “buy” recommendation is appropriate. After writing up her report, she gives it to Thornton who will be responsible for disseminating the report. The next day Fosler discovers that the Center for Disease Control (CDC) has ordered Spanish Garden to change some of its food handling procedures. She calls the CDC, and a CDC spokesman informs her that the restaurant could be closed down unless it complies with these requests immediately. Fosler calls the head quarters of Spanish Garden and is told “no comment” by a restaurant representative. Fosler relays this information to Thornton before he disseminates Fosler’s recommendation. He disseminates the recommendation without any changes. Upon learning this, Fosler made arrangements to speak with BC’s legal counsel.

With regard to the written statement concerning the success of BC’s prior venture-capital investment offerings, and the verbal slogan concerning risk and return that BC’s representatives have been instructed to say to investors, which (if any) is a violation of the Code and Standards?

A)   The written statement only.

B)   Both statements are a violation.

C)   The verbal statement only.

Correct answer is C)

According to Standard I(A), Misrepresentation, the firm and its representatives cannot make oral or written statements that misrepresent the firm’s record or what it can expect to achieve. It is not reasonable to believe that BC is capable of repealing the laws of risk and return. Therefore the verbal statement is in violation of the Standard. On the other hand, assuming that its record of success is correct as indicated, then it can publish that fact. However, some caution is warranted here as well, and, despite what BC has accomplished, past performance is not necessarily an indicator of future results. This statement should accompany the performance data.