kasinkei

A firm produces regular proprietary research reports on various companies. According to Standard VI(B), Priority of Transactions, which of the following would be an “access person?”

A) An independent auditor with access to material, non-public information on a company being analyzed.

B) A supervisory analyst who reviews all research reports prior to dissemination.

C) A person working in the mail room.

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Persons with access to information during the normal preparation of research recommendations are subject to Standard VI(B). An independent auditor is not involved in the normal preparation of research recommendations.

kasinkei

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

B) must disclose the terms of the lease arrangement.

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

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Standard VI(C), Referral Fees, requires members to disclose to clients and prospects any consideration or benefit received by the member or delivered to others for the recommendation of any services to the client or prospect. Florence has delivered a benefit (free rent) to Rigs, which must be disclosed to the clients referred by Rigs. Florence must not rely on Rigs to make the disclosure.

kasinkei

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) is not addressed in the Standard.

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

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

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Standard VI(C) says that a member must reveal information both on fees she receives for referring clients to other professionals and those she pays for having clients referred to her before a prospect becomes a client. This allows the prospect to evaluate any partiality of a recommendation and the full cost of the services.

kasinkei

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

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

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

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According to VI(C), Referral Fees, Smith must disclose to his clients that Towers provides services for Smith’s personal benefit. Neither of the Standards listed in the other answers apply.

kasinkei

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

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

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

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

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According to Standard VI(C), referral fees must be disclosed before proceeding with an agreement for service in order for the client or employer to compute the full cost of the service and to evaluate any potential partiality of the recommendation.

kasinkei

A member or candidate that receives consideration from others for the recommendation of products or services, must disclose the estimated dollar value of the consideration paid in:

A) cash, soft dollars, or in kind.

B) cash or soft dollars only.

C) cash only.

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According to Standard VI(C), Referral Fees, consideration includes all fees that are paid in cash, soft dollars, and in kind. Referral fees must be disclosed to the client or employer before engaging in an agreement to provide services.

kasinkei

Standard VI(C), Referral Fees, is applicable to:

A) only cash consideration received for the recommendation of products or services.

B) all consideration received or paid for the recommendation of products or services.

C) only consideration paid in soft dollars for the recommendation of products or services.

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According to Standard VI(C), Referral Fees, consideration includes all fees that are paid in cash, soft dollars, and in kind. Referral fees must be disclosed to the client or employer whether the consideration is received by or paid to others for the recommendation.

kasinkei

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. Towers has just become a member of CFA Institute. With this development, Towers must:

A) only reveal to the prospects referred by Smith that he performs services for Smith.

B) discontinue his services for Smith.

C) reveal to the prospects referred by Smith that he performs services for Smith, along with the estimated value of those services.

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According to VI(C), Referral Fees, as a member of CFA Institute, Towers must tell his clients about the payment in kind to Smith along with an estimate of the value of those services.

kasinkei

Joe James, CAIA, CPA, is a CFA Level II candidate living in Boston. In the course of his accounting practice, James often refers clients to a local law firm specializing in estate planning. James does not violate client confidentiality and does not receive compensation for the referral. However, the law firm often gives James tickets to the theater and major sporting events.

Which of the following statements regarding disclosure is CORRECT? James:

A) need not disclose the benefits received for referring clients because no compensation is received.

B) must disclose the benefits received for referring clients to the law firm.

C) need not disclose the benefits received for referring clients because the clients were developed in the course of his accounting practice.

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Standard VI(C), Referral Fees, requires members to disclose to clients and prospects any consideration or benefit received by the member or delivered to others for the recommendation of any services to a client or prospect. James has received a benefit (free tickets), which must be disclosed to the clients referred by James. Disclosure will allow the clients to determine any partiality of the recommendation.

kasinkei

Stephanie Orange, Level II CFA candidate, posts blogs for her exam study group three days after the exam to vent her frustrations over the exam. However, to avoid disclosing what was actually on the exam, she only discusses topic areas she thought would be on the exam that were not. She writes "...the topics selected were unnecessarily obscure. Important items like FCF, DDM, and Residual Income were ignored completely..." Orange is most likely:

A) not in violation as the information was only about what was NOT on the exam.

B) in violation of Standard VII(A) "Conduct as Members and Candidates in the CFA Program" for providing confidential information about the exam.

C) not in violation as the information about the actual exam contents was posted after the conclusion of the exam.

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Standard VII(A) "Conduct as Members and Candidates in the CFA Program" prohibits members and candidates from providing confidential information about the exam – even after the conclusion of the exam. Examples include broad topical areas tested or not tested.