9、Hunter Harrison, CFA, is president and chief investment officer of Ironclad Investments, an investment adviser and pension consultant for medium and large corporate pension clients. Ironclad recently hired a compliance officer to update its compliance manual, which follows the CFA Institute Code and Standards. Harrison serves as a director on several non-profit and corporate boards of directors, some of which have their pension assets managed by Ironclad. Harrison oversees Ironclad’s research analysts and portfolio managers, including Michelle Myers, who recently completed Level II of the CFA examination last year. Myers is a portfolio manager who regularly meets with clients and prospects. Myers also is a partner in a software company that sells retirement and benefit administration services to institutional clients, some of which are also clients of Ironclad. During her correspondence with prospects and clients, Myers commonly refers to her status as a candidate in the CFA program. She has included reference to her status as a “Level III CFA candidate” in her biographical background to increase her prominence in the industry.

During her correspondence with prospects and clients, Myers commonly refers to her status as a candidate in the CFA program. She has included reference to her status as a “Level III CFA candidate” in her biographical background to increase her prominence in the industry. What Standard governs the actions of Myers and is she in compliance?

A)   Standard III: Duties to Clients. Compliance: No.

B)   Standard IV: Duties to Employer. Compliance: No.

C)   Standard VII: Responsibilities as a CFA Member or CFA Candidate. Compliance: Yes.

D)   Standard I: Professionalism. Compliance: No.

10、All of the following most likely apply to Myers’ participation as a partner in the software company EXCEPT:

A)   Standard IV (B.5): Preservation of Confidentiality.

B)   Standard III (C): Disclosure of Conflicts to Employer.

C)   Standard IV (B.4): Priority of Transactions.

D)   Standard III (D): Disclosure of Additional Compensation Arrangements.

11、As part of Ironclad’s portfolio management activities on behalf of clients, Harrison and Myers maintain relationships with third party soft dollar providers and commission recapture brokers.

§       Better Trading Brokerage (“Better Trading”), one of Ironclad’s top ten brokers and soft dollar providers, has offered Harrison two round trip airline tickets anywhere in the U.S. in appreciation for their two-year relationship with Ironclad.

§       One of Harrison’s clients, Worldwind Travel (“Worldwind”), who participates in commission recapture, has offered Harrison two round trip airline tickets anywhere in the U.S. or Europe in appreciation for their two-year relationship with Ironclad.

Which of the following best describes Harrison’s actions under the Code and Standards?

A)   Harrison cannot accept the offer from either Better Trading or Worldwind.

B)   Harrison can accept the offer from Worldwind, but cannot accept the offer from Better Trading.

C)   Harrison can accept the offer from Better Trading, but cannot accept the offer from Worldwind.

D)   Harrison can accept the offer from both Better Trading and Worldwind.

9、Hunter Harrison, CFA, is president and chief investment officer of Ironclad Investments, an investment adviser and pension consultant for medium and large corporate pension clients. Ironclad recently hired a compliance officer to update its compliance manual, which follows the CFA Institute Code and Standards. Harrison serves as a director on several non-profit and corporate boards of directors, some of which have their pension assets managed by Ironclad. Harrison oversees Ironclad’s research analysts and portfolio managers, including Michelle Myers, who recently completed Level II of the CFA examination last year. Myers is a portfolio manager who regularly meets with clients and prospects. Myers also is a partner in a software company that sells retirement and benefit administration services to institutional clients, some of which are also clients of Ironclad. During her correspondence with prospects and clients, Myers commonly refers to her status as a candidate in the CFA program. She has included reference to her status as a “Level III CFA candidate” in her biographical background to increase her prominence in the industry.

During her correspondence with prospects and clients, Myers commonly refers to her status as a candidate in the CFA program. She has included reference to her status as a “Level III CFA candidate” in her biographical background to increase her prominence in the industry. What Standard governs the actions of Myers and is she in compliance?

A)   Standard III: Duties to Clients. Compliance: No.

B)   Standard IV: Duties to Employer. Compliance: No.

C)   Standard VII: Responsibilities as a CFA Member or CFA Candidate. Compliance: Yes.

D)   Standard I: Professionalism. Compliance: No.

The correct answer was C)

The actions of Myers are covered under Standard (VII): Responsibilities as a CFA Member or CFA Candidate and Myers appears to be in compliance with the Standard. Standard VII(B): Reference to CFA Institute, the CFA Designation, and the CFA Program requires that CFA candidates appropriately reference their participation in the CFA program, clearly stating their candidate status and not implying the achievement of any type of partial designation. Additionally, to be considered a candidate an individual must be registered to take the next scheduled exam. Since Myers completed Level II last year, and no information is provided to indicate that she is not registered for the next examination, she appears to be a candidate.

10、All of the following most likely apply to Myers’ participation as a partner in the software company EXCEPT:

A)   Standard IV (B.5): Preservation of Confidentiality.

B)   Standard III (C): Disclosure of Conflicts to Employer.

C)   Standard IV (B.4): Priority of Transactions.

D)   Standard III (D): Disclosure of Additional Compensation Arrangements.

The correct answer was C)

Standard VI(B): Priority of Transactions most likely does not apply to Myers’ participation in the software company. Standard VI(B) covers priority over transactions in securities or other investments for clients and employers to prevent any instances of “front-running” for the benefit of the member. Myers’ software business is not transaction oriented, and there is no information that describes any instances of the software company having priority in securities transactions over Ironclad or its clients.

11、As part of Ironclad’s portfolio management activities on behalf of clients, Harrison and Myers maintain relationships with third party soft dollar providers and commission recapture brokers.

§       Better Trading Brokerage (“Better Trading”), one of Ironclad’s top ten brokers and soft dollar providers, has offered Harrison two round trip airline tickets anywhere in the U.S. in appreciation for their two-year relationship with Ironclad.

§       One of Harrison’s clients, Worldwind Travel (“Worldwind”), who participates in commission recapture, has offered Harrison two round trip airline tickets anywhere in the U.S. or Europe in appreciation for their two-year relationship with Ironclad.

Which of the following best describes Harrison’s actions under the Code and Standards?

A)   Harrison cannot accept the offer from either Better Trading or Worldwind.

B)   Harrison can accept the offer from Worldwind, but cannot accept the offer from Better Trading.

C)   Harrison can accept the offer from Better Trading, but cannot accept the offer from Worldwind.

D)   Harrison can accept the offer from both Better Trading and Worldwind.

The correct answer was B)

Subject to additional disclosure, Harrison can accept the offer from Worldwind, but cannot accept the offer from Better Trading. Harrison’s actions are covered by Standard I(B): Independence and Objectivity. Under Standard I(B), members shall use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. As such, Harrison’s acceptance of the offer from Better Trading could be perceived to compromise his independence and objectivity on behalf of his clients, as the broker may be trying to influence Harrison to increase the amount of trading that Ironclad executes on behalf of clients. Since Better Trading is not a client of Ironclad, and its offer could negatively influence Harrison’s actions on behalf of Ironclad’s clients in violation of the Standard, the offer should be refused. The offer from Worldwind, who is one of Ironclad’s clients, if accepted, does not cause Harrison to violate Standard I(B). Gifts from clients are distinguishable from gifts from third parties seeking to influence the activities of an investment manager. Worldwind’s offer to Harrison may be accepted, provided it is disclosed to Ironclad in writing as additional compensation or benefits. Standard IV(B): Additional Compensation Arrangements requires members to disclose in writing any additional compensation or other benefits received for their services in addition those provided by their employer. Harrison is obligated to disclose the offer and abide by any further requirements set forth by Ironclad prior to accepting the tickets.