…it comes directly from CFAI material… Would it be a violation if Grant discloses the gift to the employer? the set-up does sound too lavish for the token gift, but if the employer approves it do you think it would go along with the standards? Thanks in advance. and good luck studying. Example 6. Edward Grant directs a large amount of his commission business to a New York-based brokerage house. In appreciation for all the business, the brokerage house gives Grant two tickets to the World Cup in South Africa, two nights at a nearby resort, several meals, and transportation via limousine to the game. Grant fails to disclose receiving this package to his supervisor. Comment: Grant has violated Standard I(B) because accepting these substantial gifts may impede his independence and objectivity. Every member and candidate should endeavor to avoid situations that might cause or be perceived to cause a loss of independence or objectivity in recommending investments or taking investment action. By accepting the trip, Grant has opened himself up to the accusation that he may give the broker favored treatment in return.
As long as Grant has discolsed all of this offerings to his employeer and the employeer has approved the same, there’s no violation of I(B). Any other viewpoints? - Dinesh S
As per CFAI book “Best practice dictates that members and candidates must reject any offer of gift or entertainment that could be expected to threaten their independence and objectivity” Clearly accepting all those gifts will affect the member/candidate independence and objectivity. By accepting the gifts the m/c is influenced to direct a large amount of commission business to the brokerage house, which most likely is to the detriment to the clients. In my opinion even if the m/c’s employer approve the gifts that will not change the m/c’s obligation to avoid situations which threaten his/hers independence and objectivity Well, that is how I see it.
alpenchev, I am feeling the same. It comes from another example: Although it is recommended that members and candidates seek the advice of legal counsel, the reliance on such advice does not absolve a member or candidate from the requirement to comply with the law or regulation. So whatever the employer says, the m/c needs itself to be responsible for his decisions. Any other opinion?
Siberian_Golfer Wrote: ------------------------------------------------------- > alpenchev, I am feeling the same. > > It comes from another example: > > Although it is recommended that members and > candidates seek > the advice of legal counsel, the reliance on such > advice does not absolve a > member or candidate from the requirement to comply > with the law or > regulation. > As far as the law goes that’s nearly not true. If you go to your lawyer and get a written opinion that you can do [blah], do [blah], get arrested for doing [blah], you have a really excellent defense. > So whatever the employer says, the m/c needs > itself to be responsible for his decisions. > > Any other opinion?
I agree with alpenchev…
What I wanted to say is that employer’s approval is not a panacea for the gift accepting situation. i think in this situation the guy should seek advice in the local CFA chapter. or apply the rule better safe than sorry.
This stuff drives me crazy. It has no real world application. When I receive gifts, I ask our lawyers (who gladly charge my firm $700/hr) and they tell me what to do
Ok, this example will crear out most of the doubts… Please have a take at it. Jack Schleifer, CFA, is an analyst for Brown Investment Managers (BIM), Schleifer has recently accepted an invitation to visit the facilities of Chemco, a producer of chemical compounds used in a variety of industries. Chemco offers to pay for his accommodations in a penthouse suite at a luxury hotel and allow him to use the firm’s private jet to travel to its three facilities located in New York, Hong Kong, and London. In addition, Chemco offers two tickets to a formal high-society dinner in New York and a small desk clock with the Chemco logo. He declines to use Chemco corporate jet and allow for the firm to pay for his accommodations but accepts the clock and the tickets to the dinner (which he discloses to his employer) since he will be able to market his firm’s mutual funds to other guests at the dinner. Has Schleifer violated any CFA Institute Standards of Professional Conduct? A. yes B. No, since he is using the gifts accepted to benefit his employer’s interests C. No, since the gifts he accepted were fully disclosed in writing to his employer D. No, since the gifts that he accepted were of nominal value and he declined to accept the hotel accommodations and the use of Chemco’s jet. - Dinesh S
I’ll go with A. Clock’s not an issue, but the tickets to a high-society dinner are probably hard to come by, thus, might be considered lavish and impeding objectivity (or perceived by others to impede objectivity). If it was just a dinner at a nice place, no prob, but a formal high-society dinner open to an elite circle only, is a no-no, I’d say.
i would go with D. He 1) disclosed gifts and 2) they were of the nominal value
i agree with lola. it seems like the high-society dinner is directly benefiting Jack’s company since he will be able to market his firm and, therefore, might threaten objectivity.
For the 2nd question (high-society) the fact that it can be used for business is possibly even MORE of a violation. Jack could be seen to lose even more objectivity so that Chemco will keep giving him such invitations. Agree with lola that the clock is the only acceptable gift. All that said… if someone wants to offer an analyst all of the items in the above examples and the analyst can’t take them because they are a charterholder, it’s time to think deeply on the individual’s economic utility of being a charterholder. I joke of course. Sort of. At least I’m putting my Econ study sessions to use…
lola and maratikus, The clock is not an issue (it’s of nominal value) and the high-society dinner he would be atteneding to promote/market his firms mutual fund… which is to the benifit of the employeer and he has discolsed all of this to his employeer, so how is this a violation??? btw, A is the correct one… but don’t get the strong reason to agree upon why the standard was breached… I completey agree with Siberian_Golfer, but unfortunatley, D is not the correct answer… - Dinesh S