Hi everyone,
I am pretty confused about the difference between loyalty and additional compensation arrangement. Can someone help me out? Thank you.
My Question
How do we differentiate between the two? My understanding is that under loyalty, the conflict that arises from independent practice occurs outside the course of work (ie. outside work). However, for additional compensation arrangement, the conflict arises during the course of work (ie. within work). For example, I get paid extra $ for my research report. However, the questions below confuse me.
In Question 1, Connie is undertaking outside work matters and so loyalty was brought up in the answer as the area of conflict.
In Question 2, David is similarly undertaking outside work matters but this time additional compensation arrangement is brought up as the issue.
Question 1
Connie Fletcher, CFA, works for a small money management firm that specializes in pension accounts. Recently, a friend asked her to act as an unpaid volunteer manager for the city’s street sweep pension fund. As part of the position, the city would grant Fletcher a free parking space in front of her downtown office. Before Fletcher accepts, she should most appropriately: A. do nothing because this is a volunteer position. B. inform her current clients in writing and discuss the offer with her employer. C. disclose the details of the volunteer position to her employer and obtain written permission from her employer.
Answer 1
C is correct.
According to Standard IV(A) Loyalty, members and candidates are expected to act for the benefit of their employer and not deprive the employer of their skills. Fletcher is performing work similar to the services that her employer provides. Whether it is voluntary is not material to the need to disclose the details of the position to her employer and get written permission before accepting the position. Informing her other clients (i.e., the clients of her employer) is not normally appropriate; the issue is with her employer.
Question 2 (taken from https://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/9988749)
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.
Answer 2
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.