Kevin Bryan is a financial analyst for Summit Investments. Bryan recently completed a research report recommending the stock of Independence Medical Company. Bryan failed to disclose that he has a material ownership interest in Independence Medical through a family trust. Kim Scott, a CFA Charterholder with Overland Associates, is invited to attend an investment management conference in the Cayman Islands. The sponsor, one of Scott’s clients, has offered to reimburse Scott for all of her expenses. Scott accepts the sponsor’s offer and discloses the arrangement to her employer in writing. Based on the CFA Institute Research Objectivity Standards, which of the following statements is TRUE? A) Summit is in violation of the Research Objectivity Standards but Overland is not in violation. B) Both Summit and Overland are in violation of the Research Objectivity Standards. C) Neither Summit nor Overland is in violation of the Research Objectivity Standards. D) Overland is in violation of the Research Objectivity Standards but Summit is not in violation.
I’d say B. Could be wrong as one of them is RECOMMENDED.
B . . . I think.
maybe A… the first one is an obvious violation but in the second part, since it is the client that is paying for expenses, i think it’s allowed. Basically your client can give you anything as a prize or reward so long as you disclose it.
I’ll take A why not… with clients paying i think it’s ok if you disclose… although these are always kind of fuzzy whether it makes you impartial or not.
I would go with A
Correct answer was A) Schweser’s answer: Summit is in violation of the Research Objectivity Standards but Overland is not in violation. Summit is in violation because policies and procedures were not in place to prevent Bryan from recommending a stock without disclosing a potential conflict of interest. Overland is not in violation. Scott can accept reimbursement since the sponsor is a client and the reimbursement was disclosed to Overland I actually went with B - what got me was they would pay for “ALL” expenses - no just reasonable expenses.
So your client can buy you a Ferrari as long as you disclose it? Or would that create a conflict of interest since it might lead you to violate the Fair Dealing standard?
It might violate the independance and objectivity standard - maybe it depends on the color?
I’m with you Wa_Wa, I thought it could only be reasonable expenses. These questions are so subjective…
Remember these are the Research Objectivity Standards…not the Code of Standards.
as far as I know the client can buy you anything as long as your employer is ok with it. the only reason why they would not be ok with it is thinking you will not care of your other clients the way you are suppossed to
I think the fine line is “unless the gift might reasonably be expected to impair your impartiality”, with “reasonably” being defined by the CFAI testwriting committee. Does that sound right? Now I’m talking about the code of standards and not Research Objectivity.
So would this be against the code of standards? Sorry if this is a dumb question, I haven’t even read ethics yet this year
there is a big difference between a client - a firm that you cover - or a client - person that you help with investments
Pinkman - but you must adhere to the stricter standard no? If the Code says you can only accept reimbursement for reasonable expense, and the ROS says “all” standards - you need to comply with the Code no?