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Which of the following statements about Standard VI(C), Referral Fees, is CORRECT?

A) Referral fees must be disclosed before proceeding with an agreement for service.

B) Referral fees may be disclosed before or after proceeding with an agreement for service.

C) Referral fees must be disclosed after proceeding with an agreement for service.

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According to Standard VI(C), referral fees must be disclosed before proceeding with an agreement for service in order for the client or employer to compute the full cost of the service and to evaluate any potential partiality of the recommendation.

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A member or candidate that receives consideration from others for the recommendation of products or services, must disclose the estimated dollar value of the consideration paid in:

A) cash, soft dollars, or in kind.

B) cash or soft dollars only.

C) cash only.

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According to Standard VI(C), Referral Fees, consideration includes all fees that are paid in cash, soft dollars, and in kind. Referral fees must be disclosed to the client or employer before engaging in an agreement to provide services.

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Standard VI(C), Referral Fees, is applicable to:

A) only cash consideration received for the recommendation of products or services.

B) only consideration paid in soft dollars for the recommendation of products or services.

C) all consideration received or paid for the recommendation of products or services.

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According to Standard VI(C), Referral Fees, consideration includes all fees that are paid in cash, soft dollars, and in kind. Referral fees must be disclosed to the client or employer whether the consideration is received by or paid to others for the recommendation.

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Wes Smith, CFA, refers many of his clients to Bill Towers, CPA, for accounting services. In return, Towers performs routine services for Smith, such as his tax returns, for no charge. Towers has just become a member of CFA Institute. With this development, Towers must:

A) only reveal to the prospects referred by Smith that he performs services for Smith.

B) reveal to the prospects referred by Smith that he performs services for Smith, along with the estimated value of those services.

C) discontinue his services for Smith.

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According to VI(C), Referral Fees, as a member of CFA Institute, Towers must tell his clients about the payment in kind to Smith along with an estimate of the value of those services.

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Joe James, CAIA, CPA, is a CFA Level II candidate living in Boston. In the course of his accounting practice, James often refers clients to a local law firm specializing in estate planning. James does not violate client confidentiality and does not receive compensation for the referral. However, the law firm often gives James tickets to the theater and major sporting events.

Which of the following statements regarding disclosure is CORRECT? James:

A) need not disclose the benefits received for referring clients because no compensation is received.

B) need not disclose the benefits received for referring clients because the clients were developed in the course of his accounting practice.

C) must disclose the benefits received for referring clients to the law firm.

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Standard VI(C), Referral Fees, requires members to disclose to clients and prospects any consideration or benefit received by the member or delivered to others for the recommendation of any services to a client or prospect. James has received a benefit (free tickets), which must be disclosed to the clients referred by James. Disclosure will allow the clients to determine any partiality of the recommendation.

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Toni Florence, CFA, CAIA, leases office space to her best friend, Tom Rigs. Florence is an independent investment advisor specializing in high net worth clients and Rigs is a licensed real estate broker. In lieu of paying rent, Rigs refers his real estate clients to Florence, but only with the clients’ permission.

For clients referred by Rigs, Florence:

A) need not disclose the referral fee if Rigs discloses the lease arrangement to the clients first.

B) need not disclose the terms of the lease arrangement because Rigs obtained the clients’ permission for the referral.

C) must disclose the terms of the lease arrangement.

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Standard VI(C), Referral Fees, requires members to disclose to clients and prospects any consideration or benefit received by the member or delivered to others for the recommendation of any services to the client or prospect. Florence has delivered a benefit (free rent) to Rigs, which must be disclosed to the clients referred by Rigs. Florence must not rely on Rigs to make the disclosure.

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Stephanie Irons, Level II CFA candidate, regularly posts in Internet chat rooms dedicated to candidates studying for the Level II exam. Throughout the season, she and other candidates discuss curriculum content in great detail. Three days after the exam, she returns to the site and vents her frustrations over complicated exam questions by posting questions she remembers on the site, and asking others for their responses and reasoning. Other candidates follow suit and post the questions they remember. Within a week, Irons and her fellow candidates are able to reconstruct about 85% of the exam from their collective memory. Finding the exercise cathartic, she is then able to return to her job and personal life and wait for her results. Irons and her fellow candidates are most likely:

A) in violation of Standard VII(A) "Conduct as Members and Candidates in the CFA Program" for discussing curriculum content in a public forum prior to the exam.

B) not in violation as the information about the actual exam contents was posted after the conclusion of the exam.

C) in violation of Standard VII(A) "Conduct as Members and Candidates in the CFA Program" for providing confidential information about the exam.

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Standard VII(A) "Conduct as Members and Candidates in the CFA Program" prohibits members and candidates from providing confidential information about the exam – even after the conclusion of the exam.

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Stephanie Orange, Level II CFA candidate, posts blogs for her exam study group three days after the exam to vent her frustrations over the exam. However, to avoid disclosing what was actually on the exam, she only discusses topic areas she thought would be on the exam that were not. She writes "...the topics selected were unnecessarily obscure. Important items like FCF, DDM, and Residual Income were ignored completely..." Orange is most likely:

A) not in violation as the information was only about what was NOT on the exam.

B) not in violation as the information about the actual exam contents was posted after the conclusion of the exam.

C) in violation of Standard VII(A) "Conduct as Members and Candidates in the CFA Program" for providing confidential information about the exam.

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Standard VII(A) "Conduct as Members and Candidates in the CFA Program" prohibits members and candidates from providing confidential information about the exam – even after the conclusion of the exam. Examples include broad topical areas tested or not tested.

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While on a business trip, John Hayes, CFA, found a notebook that had apparently been left in the waiting area of an airport. Hayes opened the notebook and read the title: Confidential: Level II CFA Examination. Before returning the notebook to CFA Institute, he made a copy and gave it to Linda Sacket, one of his firm's analysts, who was a candidate for Level II of the CFA examination. Hayes reasoned that CFA Institute would not use these questions and that Sacket would benefit from reviewing these questions. Sacket read the questions and guideline answers before taking the Level II examination. According to the CFA Institute Standards of Professional Conduct:

A) Hayes violated the Standards, but Sacket did not.

B) Sacket violated the Standards, but Hayes did not.

C) both Hayes and Sacket violated the Standards.

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Both violated Standard VII(A) because they committed an act that compromised the validity of the examinations leading to the award of the right to use the CFA designation.

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All of the following are violations of Standard VII(A), Conduct as Members and Candidates in the CFA Program, EXCEPT:

A) disregarding the rules related to the administration of the CFA examination.

B) expressing opinions in disagreement with CFA Institute advocacy positions.

C) improperly using the CFA Designation to further professional goals.

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Members and Candidates are allowed to express their opinions about the CFA Institute and CFA Program without violation of any Standards. Both of the other choices are in direct violation of Standard VII(A).