pacmandefense

An analyst belongs to a nationally recognized charitable organization, which requires dues for membership. The analyst has worked out a deal that he provides money management advice in lieu of paying dues. For this arrangement to comply with the standards, the analyst needs consent from:

A) both his supervisor in the organization and his regular place of work.

B) his supervisor in the organization only.

C) his supervisor in his regular place of work only.

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An employee/employer relationship does not necessarily mean monetary compensation for services. If the analyst is performing services for the organization, then the analyst must treat the position as if he were an employee and obtain consent from both his supervisor in the organization and in his regular place of work.

pacmandefense

An analyst working at an investment firm has a client that rents limousines. The client tells the analyst that as long as he is the client’s analyst, he can have free use of a limousine several times a year. The analyst needs to:

A) inform his supervisor in writing of the offer if the analyst intends to accept the offer.

B) do nothing since the offer is not linked to the performance of the client's portfolio.

C) explicitly refuse such an offer.

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Standard IV(B) requires that members disclose to their employer in writing all benefits that they receive in addition to their regular compensation for services they perform on behalf of their employer. They also need to get consent from their employer in writing. The written report to the employer should include the details of any written or oral agreement for extra compensation. The analyst does not have to refuse the offer.

pacmandefense

Karen Dalby, CFA, volunteers on her church’s finance board but receives no cash compensation so she does not report the arrangement to her employer. Board compensation is limited to an annual retreat to Hawaii, but the accommodations are modest. Dalby does not enjoy the retreat and often considers skipping the event entirely. Dalby is most likely:

A) in violation of Standard IV(B) "Additional Compensation Arrangements."

B) not in violation of the Code and Standards.

C) in violation of Standard IV(A) "Loyalty."

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Dalby is in violation of Standard IV(B) "Additional Compensation Arrangements." Nonmonetary compensation may still create a conflict of interest.

bapswarrior

Theresa Hatcher, CFA, is making arrangements to establish her own investment advisory business before terminating her relationship with her current employer, Elite Brokers, Inc. Elite is a small company consisting of only six investment professionals and a small support staff. According to CFA Institute Standards of Professional Conduct, which of the following activities is least likely a violation of Hatcher's duty to Elite?

A) Hatcher solicits Elite's clients before her termination of employment at Elite.

B) Hatcher leases office space, furniture, and other equipment for her new business.

C) Hatcher engages in secret negotiations with two other investment professionals and her administrative assistant to leave Elite in order to join her new business.

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Standard IV(A) permits Hatcher to make preparations to begin a new practice, such as leasing office space, furniture, and other equipment, but not to engage in the other activities that may violate her duty to employer.

bapswarrior

Brian Bellow, a CFA Institute member, is a portfolio manager for Progressive Trust Company. Several friends asked Bellow to review their investment portfolios. On his own time, Bellow examined their portfolios and made several recommendations. He received no monetary compensation from his friends for his investment advice and provided no future investment counsel to them. According to CFA Institute Standards of Professional Conduct, did Bellow violate his duty to Progressive Trust?

A) No, because Bellow received no monetary compensation for his services.

B) Yes, because he undertook an independent practice that could result in compensation or other benefit to him.

C) No, because Bellow provided no ongoing investment advice.

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Standard IV(A) does not preclude providing independent services for compensation while still employed; however, notification to the employer is required describing the type of service, the expected duration, and the compensation. Compensation includes more than just monetary benefits.

bapswarrior

John Hill, CFA, has been working for Advisors, Inc., for eight years. Hill is about to start his own money management business and has given his two-week notice of his resignation from Advisors. A few days before his resignation takes effect, on his lunch hour, he takes out a loan from a bank on behalf of his new business and uses the money to buy some office equipment for his new business. Since he engaged in these transactions while still an employee of Advisors, Hill violated Standard IV(A), Loyalty to Employer, by:

A) engaging in a financial transaction, like taking out a loan, only.

B) neither of these actions.

C) both taking out the loan and purchasing the office equipment.

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The Standards of Practice under IV(A) expressly says that a departing employee is “generally free to make arrangements or preparations to go into a competitive business before terminating the relationship with the employee’s employer provided that such preparations do not breach the employee’s duty of loyalty.” Neither of these actions are in conflict with the interests of Advisors, and Hill performed them on his own time.

bapswarrior

John Hill, CFA, has been working for Advisors, Inc., for eight years. Hill is about to start his own money management business and has given his two-week notice of his resignation from Advisors. A few days before his resignation takes effect, a former client of Advisors calls Hill at his home about his new firm. The former client says that he is very happy that Hill is leaving Advisors because now he and Hill can resume a professional relationship. The client says that he would never become a client of Advisors again. Hill promises to call the client back after he has left Advisors. Hill does not tell his employer about the call. Hill has most likely:

A) violated the Standard concerning disclosure of conflicts.

B) violated the Standard concerning loyalty to employer.

C) not violated the Standards.

Based on the information here, Hill has done nothing wrong. He took a call at his home, presumably on his own time, and the client made it clear that he would never be a client of Advisors. Therefore, there was no breach of loyalty to Advisors by Hill, nor is there a conflict of interest.

bapswarrior

Sue Parsons, CFA, works full-time as an investment advisor for the Malloy Group, an asset management firm. To help pay for her children’s college expenses, Parsons wants to engage in independent practice in which she would advise individual clients on their portfolios. She would conduct these investment activities only on weekends. She is currently only in the preparation stage and has not started independent practice yet. Which of the following statements about Standard IV(A), Loyalty to Employer, is most accurate? Standard IV(A):

A) requires Parsons to obtain written consent from both Malloy and the persons from whom she undertakes independent practice.

B) does not require Parsons to notify Malloy of preparing to undertake independent practice under the current conditions.

C) requires Parsons to notify Malloy in writing about her intention to undertake an independent practice.

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Standard IV(A), Loyalty to Employer, requires that Parsons obtain written consent only from her employer before she undertakes independent practice that could result in compensation or other benefit in competition with Malloy. It is not required to get permission from your employer when only preparing to go into independent practice.

bapswarrior

Grant Starks, CFA, has been working for Advisors, Inc., for eight years. Starks is about to start his own money management business and has given his two-week notice of his resignation. A few days before his resignation takes effect, a current client of Advisors calls him at his office to inquire about some services for her account at Advisors. During the conversation, Starks tells the client that his new business will have lower commissions than Advisors. Starks has most likely violated:

A) Standard IV(A), Loyalty to Employer, by competing with his current employer.

B) Standard VI(B), Priority of Transactions, by violating the priority of transactions.

C) none of these Standards.

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This is a breach of loyalty to his current employer. By telling a current client of his employer about the lower commissions he will charge in his new business, Starks is placing himself in direct competition with Advisors, and this is a violation of Standard IV(A).

bapswarrior

Michel Marchant, CFA, recently became an independent money manager. After six months, he has only ten clients, who are family and friends. To supplement his income, Marchant accepted part-time employment as an advisor at Middleton Financial Advisors. According to CFA Institute Standards of Professional Conduct, which of the following statements about Marchant's duty to his new employer is CORRECT?

A) Marchant need not inform Middleton about his existing clients but must inform his existing clients about his new part-time employment at Middleton.

B) Marchant must inform Middleton about his existing clients but need not inform his existing clients about his new part-time employment with Middleton.

C) Marchant must inform Middleton to keep his existing clients and must inform his existing clients of his new part-time employment at Middleton.

Standard IV(A) and IV(B) requires that Marchant inform both Middleton and his existing clients.