Ethics Question need explanation facilities, Investment, invitation, one

dkishore1

Hi Guys,
Putting here one Ethics question, Please explain the correct answer...

Jack Schleifer, CFA, is an analyst for Brown Investment Managers (BIM).
Schleifer has recenrly accepted an invitation ro visit the facilities of ChemCo, a
producer of chemical compounds used in a variety of indusrries. ChemCo offers
ro pay for Schleifer's accommodations in a penthouse suitc at a luxury hotel and
allow Schleifer ro use the firm's private jet ro rrave! ro its three facilities located
in New York, Hong Kong, and London. In addition, ChemCo offers rwo tickets
ro a formal high-society dinner in New York and a small desk clock with the
ChemCo logo. Schleifer declines to use ChemCo's corporate jet or ro allow the
firm ro pay for his accommodations but accepts the clock and the tickets ro the
dinner (which he discloses ro his employer) since he will be able ro market his
firm's mutual funds ro other guests at the dinner. Has Schleifer violated any CFA
Institute Standards of Professional Conduct?
A. Yes.
B. No, since he is using the gifts accepted ro benefit his employer's interests.
C. No, since the gifts he accepted were fully disclosed in writing ro his
employer.

lc26mizzou

Did someone replace your "r" key with the "t" key??

I think it's C because of disclosure.

Btw, superstitious people would be angry if you gave them a clock for a present.

MonkeyBusiness

I copy this question from Schweser Study notes and they are saying correct answer is A and explanation is that violation of Standard I(B) independence and objectivity. They mentioned that Since it is a formal high-society dinner, the tickets are most likely expensive or hard to come and influence his future research in favour of ChemCo.

I was also thinking correct answer is C if this dinner doesn't affect his independence.

Kiakaha

Sticking with A, make sure that you remember that you aren't using this in real-life situations many times. These are all hypothetical and they are black and white. If CFA says expensive tickets may sway your judgment, even if you know that your own personal judgment would not be swayed by these tickets, you have to say it is a violation. Whether or not that is the case in the real world doesn't make a difference on this exam. I saw someone's post recently that said something to the extent of "forget what you see analysts do on a daily basis and only think of it from the lens of the CFAI until this exam is over."

homie

I remember this from the book. The answer is A.

You can't accept any gift that might reasonably affect your independence or objectivity regardless of the reason or if you disclose.

Flok

Is disclosing to his employer equates he has obtain permission?

I(B) states even though member/candidate should avoid accepting gift that may affect their independence, it also states that member/candidates must disclose the gift so that their employer is able to assess the situation.

jim8z3

revenant

the quote you gave is correct. However, it applies for gift from CLIENTS, where standard is more linient since gift from clients can be as part of compensation.
Chemco is not a client, but a corporation wanting to have favorable coverage so the bar is set much higher. Agree with job71188 and CzarHC for their arguments --> answer A

studyn

Don't confuse gifts from entities with gifts from clients.

If you are getting a gift from a company you are analyzing be more strict with the rule regarding gifts. If the gift is from a client, you disclose it as additional comp so the employer can judge the effect.

trogulj

I see. So, even if the employer force him to go, it would be a violation of the standard?

FVPV

The employer can force him to go, but either Schleifer or BIM would have to pay for it to remain within the code and standards.