ETHICS Q marketing, includes, accounts, continue, question

tango_gs

Maybe I'm retarded for over-thinking this or just sleep deprived. Have a question about an example in the book re: Ethics.

It's example 3, page 25:

In summary, Finance Person K.W. advertises 10 yr track record of their firm in marketing materials. K.W. learns the track record has been compiled improperly and overstates returns (includes accounts which have since left the company, etc.). K.W. supervisors insist they use the incorrect data and continue to market. If K.W. continues to use the mis-stated material they are in violate of Standard I (A) Law.


My question is: Why is this a violation of Standard I (A) Law and not Standard I (C) Misrepresentation ?

It says nothing about the law. I assume it's illegal in the US or the EU, but this isn't illegal in many countries where securities laws are not fully developed. I would think this would be misrepresentation not a violation of the law...

llxx

It is a violation of both Standard I(A) and I(C).

Why is this a violation of Standard I (A)?
- Because misrepresentation is a violation of CFAI Standards of Professional Conduct. Knowing participating in the violation will constitute a violation of I(A).

The book never says that Washington did not violate I(C). The purpose of the case study is to show an example of I(A) violation, not I(C). That's probably why it doesn't elaborate on the I(C) breach.

FinancialAnaly

i fully agree it should be Misrepresentation. Damn ethics, its so freaking subjective. The Schweser Live Mock killed everyone on ethics it was out of control.

comp_sci_kid

AndrewUNH Wrote:
-------------------------------------------------------
> Washington is not the one misrepresenting
> something, the firm is. It's her job to be on top
> of the knowledge of the laws and disassociate from
> the firm if they are breaking the laws.

If Washington distributes the material, he is actually misrepresenting. Just like if I'm your boss and I tell you to tell all prospective clients we guarantee 8%+ returns. You get into a meeting w/ a prospective client and say, "We're gonna guarantee you an 8% return." You didn't violate Standard I (A), you violated Standard I (C) misrepresentation.

Paper marketing materials is just one form of communication. Misrepresentation is misrepresentation, no matter what form.

bbtomato

I definitely agree with you on this. I'm not surprised though, I've seen questionable solutions quite a few times, especially on the Ethics material.

WarrenB1

Washington is not the one misrepresenting something, the firm is. It's her job to be on top of the knowledge of the laws and disassociate from the firm if they are breaking the laws.