Q7. Harrison, as chief investment officer, is chairman of Ironclad’s proxy voting committee, while Myers is a voting member.  Ironclad, as a discretionary investment manager, votes proxies on behalf of clients.

• Ironclad is currently reviewing proxies for several companies covered in research, including technology companies Advanced DSL (“Advanced”), Internet Connections (“Internet”), Speedy Chip Technology (“Speedy Chip”) and Wavelength Digital (“Wavelength”), which have all presented the expensing of employee stock options for vote in their current proxies.

• Investment personnel of Ironclad recently participated in an industry forum in support of increased disclosure for company stock options, which Ironclad believes provides investors with a more accurate perspective of corporate earnings.

• Contrary to committee consensus, Harrison and Myers vote client proxies “against” the expensing of employee stock options for Internet, Wavelength and Speedy Chip.

All of the following describe Harrison's actions for compliance with the Code and Standards regarding proxy voting EXCEPT:

A)   Harrison should maintain the confidentiality of voting information on behalf of Ironclad’s clients.

B)   Harrison should vote in accordance with Ironclad’s policy and coordinate major proxy issues across all client accounts.

C)   Harrison should discard all proxies on behalf of Ironclad’s clients when there is a conflict of interest.

Q8. A stockbroker who is a CFA Institute member is called on the telephone by the CEO of a large company. The CEO asks to buy shares of the CEO’s company for the accounts of the CEO’s children. In the course of the conversation, the CEO says this will really pay off when the upcoming takeover goes through. The stockbroker checks her sources and finds no information about the takeover. In this case the broker should:

A)    only execute the order in compliance with Standard III(A), Loyalty, Prudence, and Care. Since the client is buying the stock for the children, there is not a problem.

B)    execute the order for all clients as required by Standard III(B), Fair Dealing.

C)    do neither of the actions listed here.

答案和详解如下：

Q7. Harrison, as chief investment officer, is chairman of Ironclad’s proxy voting committee, while Myers is a voting member.  Ironclad, as a discretionary investment manager, votes proxies on behalf of clients.

• Ironclad is currently reviewing proxies for several companies covered in research, including technology companies Advanced DSL (“Advanced”), Internet Connections (“Internet”), Speedy Chip Technology (“Speedy Chip”) and Wavelength Digital (“Wavelength”), which have all presented the expensing of employee stock options for vote in their current proxies.

• Investment personnel of Ironclad recently participated in an industry forum in support of increased disclosure for company stock options, which Ironclad believes provides investors with a more accurate perspective of corporate earnings.

• Contrary to committee consensus, Harrison and Myers vote client proxies “against” the expensing of employee stock options for Internet, Wavelength and Speedy Chip.

All of the following describe Harrison's actions for compliance with the Code and Standards regarding proxy voting EXCEPT:

A)   Harrison should maintain the confidentiality of voting information on behalf of Ironclad’s clients.

B)   Harrison should vote in accordance with Ironclad’s policy and coordinate major proxy issues across all client accounts.

C)   Harrison should discard all proxies on behalf of Ironclad’s clients when there is a conflict of interest.

Correct answer is C)

Proxy voting is a plan asset under ERISA and as such, is subject to the fiduciary duty obligations. Ironclad, as a discretionary investment manager, is responsible (unless otherwise stipulated in the client guidelines or agreement) for making informed and reasonable decisions regarding proxy voting on behalf of clients. Among other things, Ironclad should have a proxy voting policy and a process for identifying and reviewing major proxy issues for appropriate clients. Ironclad and Harrison also have an obligation to avoid conflicts of interest when voting proxies. Although Harrison has a conflict of interest in voting issues on behalf of Internet and Wavelength due to his role on their board of directors, proxies should not be discarded under any circumstances, as such action would constitute a breach of fiduciary duty. Harrison should abstain from voting on matters affecting Internet and Wavelength to avoid the appearance of a conflict of interest. Harrison should also ensure proper treatment of any confidential information received in his role on the respective boards of directors. Harrison should maintain confidentiality of voting information on behalf of clients and follow Ironclad’s proxy voting policy, coordinating major proxy voting issues across all client accounts.

Q8. A stockbroker who is a CFA Institute member is called on the telephone by the CEO of a large company. The CEO asks to buy shares of the CEO’s company for the accounts of the CEO’s children. In the course of the conversation, the CEO says this will really pay off when the upcoming takeover goes through. The stockbroker checks her sources and finds no information about the takeover. In this case the broker should:

A)    only execute the order in compliance with Standard III(A), Loyalty, Prudence, and Care. Since the client is buying the stock for the children, there is not a problem.

B)    execute the order for all clients as required by Standard III(B), Fair Dealing.

C)    do neither of the actions listed here.

Correct answer is C)

Doing any of these actions would be a violation of Standard II(A), Material Nonpublic Information. Members and Candidates must not act or induce others to act on material nonpublic information.