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The following information concerns two analysts at Mega Securities Company.

• Mega recently hired Ron Anderson, CFA, who was previously an independent investment advisor. Anderson wants to keep his existing clients for himself and obtains written consent from Mega to do so. He also informed his existing clients in writing about his new position at Mega.
• Brenda Ford, a CFA Institute member, has been a full-time analyst for Mega for 12 years. She recently started providing investment services, which compete with Mega, to private clients on her own time. Ford obtained written consent for this arrangement from her direct supervisor at Mega. Ford has not disclosed to each of her clients her employment at Mega.

According to CFA Institute Standards of Professional Conduct, have Anderson and Ford violated Standard IV: Duties to Employers?

A) Anderson violated this Standard, but Ford has not.

B) Both Anderson and Ford have violated this Standard.

C) Neither Anderson nor Ford violated this Standard.

D) Ford violated this Standard, but Anderson has not.

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Answer and Explanation

Standard IV(A) requires consent to enter into independent practice. Standard IV(B) Additional Compensation Arrangements states that no compensation may be accepted which may create a conflict of interest without written consent from all parties. Anderson received consent from all parties, Ford did not receive consent from her independent clients.

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Nick O'Donnell, CFA, unsuspectingly joins the research team at Wickett & Co., an investment banking firm controlled by organized crime. None of the managers at Wickett are CFA Institute members. Because of his tenuous situation at Wickett, O'Donnell begins making preparations for independent practice. He knows he will be terminated if he informs management at Wickett that he is preparing to leave. Consequently, he determines that "if he can just hang on for one year, he will likely have a client base sufficient for him to strike out on his own." This action is:

A) a violation of his duty to disclose conflicts to his employer.

B) a violation of his fiduciary duties.

C) not in violation of the Code and Standards as the employer's violations of the law absolve him from his ordinary duties to this employer under the Code and Standards.

D) not a violation of his duty to employer.

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Answer and Explanation

ODonnell is required to obtain consent from his employer if he is attempting to practice in competition with his employer. Merely undertaking preparations to leave, which do not violate a duty, is not a violation of the Code and Standards.