Ethics Question - Doesn't make sense

Doug Watson, CFA, serves in a sales position at Sommerset Brokerage, a registered investment adviser. As part of his employment, he is expected to entertain clients. Frequently at these client outings, Watson drinks excessively. On one occasion, after dropping off a client, Watson was cited by local police for misdemeanor public intoxication. According to the Standard on knowledge of the law and the Standard on misconduct, Watson is in violation of:

a) Both standards

b) Neither standards

c) One of the standards.

The correct answer is b) because it occured outside of work and there’s no evidence that it has affected his integrity, judgement or reptuation.

How is this possible? He’s entertaining clients and drinking excecssively would reflect on him. Am I missing something here?

That’s correct . the answer is B. Remember it only would take into account, if it affected during his “Financial work”, if anything outside is non related. For example if i get a DUI, after i just got done attending a client. It still would be outside of Financial work

Wow, that’s a tough one. I would have gotten that incorrect, as well. kngods provides a good explanation which exemplifies why it’s important to fully understand the concepts. If it isn’t at work, it’s not misconduct under the Standards.

But remember, if he drinks during lunch break it would reasonable perceived as to affect his judgement and reputation. So be careful while reading those cases.

The question states that he’s entertaining clients so he’s technically still at work. You don’t need to be in the office just to be at work. This question is confusing.

wow, i would hope CFAI doesn’t give us questions like that on exam; that would be cruel.

That’s a weak question. If it reflects poorly on him (and thus on the emnployees that his firm hires), I think it should eb a violation.

I agree with dwheats: I think that the author of this question blew it.

Drunk in public when out with spouse and friends: one thing. Drunk in public when out with clients: another thing entirely.

I have a similar question from CFA mock:

[question and answer removed by admin]

The correct answer is C. This case as well he outside work when he is pulled by traffic policeman. So why it is a violation of CFA code of ethics? I chose yes by eliminating A and B, but did not understand the concept.

I remember this messed up question. To me, both standards are violated. Drinking excessively is NOT a violation OUTSIDE of work. However, drinking excessively and acting illegally in the streets is a misdemeanor, and he KNOWS it is, and still does it. He violates the knowledge of the law, and the misconduct (well, he got arrested right?)