Under standard 4a. Loyalty it says we need to get permission from employer before engaging in independent practice. Standard 4b Additional compensation arrangements SAYS we need to get written consent from all parties prior to engaging in work that competes with the firm. So to not be in violation of any standard would you have to get written permission from all parties prior to engaging?
When in doubt, go overboard on disclosure. Independent practice is not always equal to competing practice. Always disclose independent practices, and always get permission prior to starting a competing position.
David Saul, CFA, heads the trust department at Savage National Bank. Fairway Enterprises invites Saul to sit on its Board of Directors. In return for his services on the Board, Fairway offers to provide Saul and his family with access to the facilities at Wilmont Country Club at no cost. Saul will not receive any monetary compensation for his services on the Board. According to CFA Institute Standards of Professional Conduct, which of the following actions must Saul take? A) Saul must obtain written consent from all parties to only if he decides to accept the offer to serve on the Board of Directors. B) Saul must disclose in writing to Savage Bank the terms of the offer whether or not he accepts the offer to serve on the Board of Directors. C) Saul must reject the offer to serve on the Board of Directors.
Your answer: A was correct! Standard IV(B) requires that members obtain written consent from all parties involved before accepting monetary compensation or other benefits that they receive for their services that are in addition to compensation or benefits conferred by a member’s employer. In this situation, Saul may also be obligated to disclose his participation on Fairway’s Board to clients, prospective clients, and employer under Standard VI(A), Disclosure of Conflicts.
wow. tricky. you definitely need to disclose your additional compensation, even if its non-monetary. not sure if you need to disclose even if you don’t accept, also not sure about consent in writing. but i guess A
Just make sure he hasn’t formally accepted before notifying his supervisor, or that will be a violation.
How are ‘’additional compensation arrangements’’ and ‘’independent practice’’ standards interrelated?
- Independent practice = only consent required
- Additional compensation arrangements (boards, independent practice, etc) = written permission required
My question is, if the above is correct, what kind of independent practice has no compensation ?