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Sharon West is a CFA charterholder and trust officer for REO Trust Company. Soon after beginning work for REO, West finds that REO has been conducting all its securities transactions through her brother who is a registered representative. West's brother charges REO commissions that are equal to the lowest available from another broker. West's brother tells her that if she continues doing business with him, he will give her a substantial discount on all personal transactions she conducts through him. West:

A) must inform her employer of the arrangement because she is doing business with a member of her immediate family.

B) must inform her employer of the arrangement because it provides her with additional compensation.

C) does not need to inform her employer of the arrangement because REO has been doing business with her brother before she was hired.

D) does not need to inform her employer of the arrangement because the commissions her brother charges the firm are the lowest possible.

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Answer and Explanation

Members are required to disclose to their employer in writing all monetary compensation or other benefit they receive in addition to the employers compensation. The discounting of Wests commissions is a benefit that must be disclosed.

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Dan Lee, CFA, is a portfolio manager with Jewel Investment Advisors. Doris Black, one of Lee's long-time clients, told Lee the he could use her vacation home in Aspen, Colorado, for a week during skiing season if the return on her portfolio exceeded its benchmark by two percentage points during the next year. Black also agreed to reimburse Lee and his wife for their transportation expenses to Aspen. Lee accepted this arrangement. According to CFA Institute Standards of Professional Conduct, what is Lee's obligation, if any, to disclose this arrangement to Jewel? Lee:

A) need not disclose either the arrangement to use Black's vacation home or the reimbursement of expenses.

B) must disclose in writing the arrangement to use Black's vacation home but not the reimbursement of expenses.

C) must disclose the reimbursement of expenses but not the arrangement to use Black's vacation home.

D) must disclose both the arrangement to use Black's vacation home and the reimbursement of expenses.

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Answer and Explanation

Standard IV(B) requires that Lee disclose to Jewel in writing all monetary compensation or other benefits that they receive for their services.