Terry Welch, CFA, is a portfolio manager for Barr investments. Welch began using ORH Brokers as his sole broker five years ago. ORH’s competitive fees and superior trade execution have drawn the attention of Welch’s colleagues, many of whom now only use ORH to place trades. In appreciation for the long-standing relationship, ORH offers Welch tickets to a performance of the local symphony, which he accepts. The tickets have a total value of $90. Welch elects not to report the gift to his employer since it does not meet Barr’s reportable threshold value of $100. Do Welch’s actions with regards to the symphony tickets violate any CFA Institute Standards of Professional Conduct? A. No violation. B. Welch is permitted to accept the tickets, however in this instance, written permission is required from the employer. C. Welch is in violation of the Standards. What is your answer and WHY? Thanks
C because its a token gift so written permission is not required. However he needs to disclose this.
I concur
answer is C
That’s what I thought to, but schweser has the answer to be A
Here is their explanation A) Standard 1(B), according to the Standard, members must maintain independence and objectivity with regard to their professional duties. Members must not accept any gift that may compromise their independence and objectivity. Because Welch has had a long-standing relationship with ORH brokers, the symphony tickets have relatively small value, and because ORH provides superior execution at competitive commission rates, it is unlikely that the symphony tickets will influence Welch’s independence and objectivity. Therefore it is acceptable for Welch to take the tickets without any disclosure. Modest gifts are OK and no disclosure is required.
Good question. Thank you esco
I also would have went with A. Excellent question esco, point well taken. Long standing relationship + relatively small value = ok according to CFAI institute. Uh oh, I made a blanket statement about ethics…run to the hills.
I think people when are not sure of the question go to the most conservative answer (i.e in violation ) i think in ethics it works in the opposite side
A). Standards I-B~Becouse it is under $100, if it were over then it would need to be diclosed to mgmt.
I am not trying to argue or something, but please clear this issue for me. Where in the Standards of Practice Handbook does it say that “gifts of that do not influence Independence & Objectivity” need not be disclosed? According to I (B), page 22 , 2nd paragraph of CFAI Book I, it says that “members and candidates may accept “bonuses” or gifts but must disclose to their employers such benefits from clients. Disclosures allows the employers of a member or candidate to make an independent determination about the extent to which the gift may affect the member’s or candidate’s independence and objectivity”. I dont remember where but I seem to have read somewhere that Members/Candidates should let let Employers/Clients decide whether there is a conflict of interest or not. Please help me out on this one. Getting confused.
kh.asif~ Good Q, I beleive this might help clarify, I came across this defination in the actually CFA SPC handbook, page 15~In brief anything under $100 is deemed ‘resonable’ and over $100 is interputed as a violation~ In both the CFAI text and the SPC handbook they are quick to add the cavet that it is best practice to tell mgmt about all gifts regardless of amount, to be in the safe side, but as far as a test question I beleive this is the direction. Over or under 100bucks should be your first key (B) Independence and Objectivity Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. Members and Candidates must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another’s independence and objectivity.
Thanks ‘dewey’ for your reply. The reason I am digging deep is because, I have this feeling that Schweser is not always correct. In that case the only way to be sure is by following the SPC Handbook. I went through all the examples to find a relevant example but couldn’t get one. The only option to get confirmed is if the SPC clearly states something like this, that for token gift no disclosure is required. For those gifts or bonuses that might compete with the employers interest or create a conflict of interest the MEMBER/CANDIDATE must get written consent. This much is sure. But for ‘token’ gifts not even a disclosure required? Did anyone come across such a question in the CFAI mocks?
*Btw Secret Sauce also mentions that ‘you can accept gifts from clients as long as properly disclosed’. However in Qbank they mentioned multiple times that token gifts need not be disclosed.
Do you need to disclose something that is a token gift, i.e. less than $100? I’m pretty sure I read somewhere that you have to disclose no matter the value in consideration, anyone confirm?
esco Wrote: ------------------------------------------------------- > Do you need to disclose something that is a token > gift, i.e. less than $100? I’m pretty sure I read > somewhere that you have to disclose no matter the > value in consideration, anyone confirm? that is exactly what i believed till now. anywayz i send a service request to CFAI on this issue. hope they clear the thing.
kh.asif- This is not a gift from client but a broker so that I (B) paragraph doesn’t apply. It does on the Independence and Objectivity which Members and Candidates must use “reasonable care and judgment” to achieve and maintain independence and objectivity in their professional activities. I think a ticket of $90 is consider reasonable.