Ass Man code dilemma dilemma

Dapper425

If one key employee of your asset management firm has been ACCUSED of wrongdoing by the regulator, are you supposed to disclose this to clients and prospects? Even though they haven't been found guilty yet!

What do you think?

oneboy

sorry, clicked too fast

an accusation by an individual client (especially when whithout further evidence), IMHO, should NOT be supposed to be disclosed.

F.e., reading Harry Markopolous book about the Madoff fraud, he explained that the SEC receives numerous accusations like "my broker underperformed the index, he must be betraying me".

In that case (of an individual client accusation), I would look for further clues if substantiated or not

strikethree

FINRA and the SEC regularly disclose open cases against individuals long before settlement has been reached.

I think you would have to disclose a regulatory investigation and when you look at the "expert network" violations from a few months ago, JNS, Invesco, etc came right out and said they were under investigation.

From a legal standpoint it is obviously much better to over disclose than under disclose.



Edited 1 time(s). Last edit at Tuesday, May 31, 2011 at 05:39PM by Paraguay.

Analti_Calte

I agree with Paraguay (how couldn't I), that if an investigation is already out in public, you better disclose disclose that as the investigation as such may have a material impact whether a client may want to make business with you or not (a "catch all" phrase in AMC)

Unforseen

That's a tough one

In the recommendations they write "actions" (s. below) which I understand is AFTER a VERDICT.

Assuming that even CFAI takes into account that principle "Innocent until proven guilty" I would think that this principle applies too, as I read the CFAI-book: ("...found to have violated..." and NOT "under investigation").

BUT, Sniper, as you write "ACCUSED", this means that they may have FINISHED THE INVESTIGATION, what an attorney usually does BEFORE he accuses someone of something (at least according to German law)


b. Regulator y or disciplinar y action taken against the Manager or its personnel related to professional conduct.
Past professional conduct records are an important factor in an investor’s selection of a Manager. This record includes actions taken against a Manager by any regulator or other organization.
Managers must fully disclose any significant instances in which any employee or the firm has been found to have violated conduct standards or other standards reflecting on the integrity, ethics, or competence of the individuals or organization involved.
(Level III Volume 1 Ethical and Professional Standards , 4th Edition. Pearson Learning Solutions p. 281).
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