Additional compensation arrangements - Not-for-profit?

Here’s a summarized question that I stumbled across,

John Smith, CFA, manages a small investment account for a local not-for-profit, Doe’s Charity. John manages the account during the weekends when he’s not managing portfolios for his employer. His employer is not aware of the arrangement. Is john most likely violating the Standards?

A) Yes, because he is competing with his employer B) Yes, because he has not received permission C) No, if he is not compensated for his work

I chose B, because he hasn’t received permission from his employer, however, the answer turns out to be C.

Is the answer C, only because its charity? What if its another firm where he’s being paid for this time, would the answer become B?

How about if John receives a tax-credit for his time; is a tax-credit considered compensation? what would the answer be then?





Yoyogu, you brought up a good point.

I might have randomly guessed between B or C. The answer makes sense that he’s not getting paid though.

Then what if he was getting paid. Would he be violating additional compensations and conflict of interest or only additional compensation?

In a separate note, let’s assume he teaches a group to play piano on his free time and receive cash. I don’t believe he is required to notify his employer about this?

I don’t think he is required to disclose such and arrangement. He is doing this on his free time and there is no conflict of interest as his professional (investment mgmt) and personal (i.e piano) are irrelevant.

However there could be a potential conflict of interest - he is managing investment portfolios in both cases. This fact alone creates a potential conflict of interest to be disclosed to the employer.

Just my opinion… As often the answers here are kind of arbitrary. Regards, Oscar