bmaggie

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 violated:

A) both Standards IV(A) and VI(A).

B) neither of these Standards.

C) Standard IV(A), Loyalty to Employer, by lining up business before he leaves the firm.

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Based upon 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.

bmaggie

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

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

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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.

bmaggie

Mary Hiller, CFA, is a senior analyst at a mutual fund. She is also a member of the Board of the Directors of her daughter’s Skating Club. She is often asked for advice about the management of the club budget and about possible short-term investments, but she is not paid for this advice. She does not undertake any research to answer these questions, providing information based only on the general practices of the mutual fund at that moment. The only benefit she receives is a free monthly membership for her daughter that would usually cost $182. What should she do before making any recommendations, in order to comply with the CFA Institute requirements?

A) Obtain prior permission from her employer.

B) Inform her current clients about her outside consulting.

C) Consult only on her free time and do not accept any benefit greater than $100.

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According to Standard IV(A) Loyalty to Employer, it is the employee’s duty to inform the employer about any type of outside consulting service, including duration and any compensation. Only after receiving permission from her employer, can she proceed.

bmaggie

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) start the registration of her new company.

B) solicit Branford colleagues but not Branford clients.

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.

bmaggie

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.

bmaggie

Bill Valley has been working for Advisors, Inc., for several years, and he just joined CFA Institute. Valley’s sister just received a large bonus in the form of stock options in Zephyr, Inc. Valley’s sister knows nothing about financial assets and offers Valley a week at her holiday home each year in exchange for Valley monitoring Zephyr and the value of her stock options. In order to comply with the Code and Standards, Valley needs to inform Advisors of:

A) both the use of the holiday home and his sister's options.

B) nothing since no money is involved and it is a favor for a family member.

C) the compensation in the form of the use of the holiday home only.

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According to Standard IV(A), Loyalty to Employer, Valley must inform Advisors of his outside consultation even if it is not for monetary compensation. According to Standard VI(A), Disclosure of Conflicts, Valley must also disclose possible conflicts of interest, and his sister’s position qualifies.

bmaggie

Isabella Travelli, CFA, is a research analyst for Worldwide Investments in Rome, Italy. Travelli was contacted by Seaside Partners of Milan, Italy, a regional brokerage firm, about doing research on companies in the beverage industry on a contract basis.

Travelli may only do the contract work:

A) if Worldwide does not follow the beverage industry.

B) after receiving consent from both Worldwide and Seaside.

C) if Worldwide has no clients in the same geographic area as Seaside.

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Standards IV(A) and IV(B) require members to obtain written consent from both their employer and the contracting party before undertaking independent practice in competition with their employer. Travelli needs to seek such consent from both entities because it does not appear that she can argue successfully that there is no competition between Worldwide and Seaside. They apparently are both research firms, industry specialization may not prevent competition, and Travelli should be devoting her time and energy to her employment, unless her employer consents to the contract work.

bmaggie

A CFA Institute member, undertaking independent practice that could result in compensation or other benefit:

A) must notify his employer of the types of service to be rendered, the expected duration, and the expected compensation.

B) must notify the entities for whom he plans to undertake independent practice of the compensation he receives from his employer.

C) must notify his employer and clients of the types of service to be rendered and the expected compensation.

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According to Standard IV(A), Loyalty to Employer, a CFA Institute member, undertaking independent practice that could result in compensation or other benefit, must notify his employer of the types of service to be rendered, the expected duration, and the expected compensation.

bmaggie

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

B) Taking home the employer's buy lists.

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.

bmaggie

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

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

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.