Reading 2-VI: Standards of Professional Conduct & Guida

licensed, office, class, investment, friend

Q1. 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) must disclose the terms of the lease arrangement.

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

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

Q2. An analyst who is a member of CFA Institute has composed an introductory information packet for her new clients, which includes information on fees she receives for referring clients to other professionals and those she pays for having clients referred to her. With respect to Standard VI(C), Referral Fees, this action:

A) may not satisfy the Standard if such information is only provided after the receivers of the information have become clients.

B) is not addressed in the Standard.

C) exceeds the requirement of the Standard because she does not need to reveal the fees she pays to those that refer clients to her.

Q3. 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. With respect to this relationship, Smith:

A) is in violation of both Standard V(B) and III(B).

B) is only in violation of Standard III(B), Fair Dealing, by not putting the client first.

C) must disclose to his clients that Towers provides services for Smith's personal benefit.

Q4. Which of the following statements about Standard VI(C), Referral Fees, is TRUE?

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

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

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