Compensation Qbank

Selma Brown, CFA, is a portfolio manager for Mainland Securities. Rick Wood, one of her clients and owner of Wood Fitness Centers, offers to permit Brown and her immediate family to use the facilities at his fitness centers at no cost during 2003. To get this benefit, Brown must achieve on Wood’s portfolio at least a 2-percentage point return above the total return on the S&P’s 500 index during 2002. Brown orally informs her immediate supervisor of the nature and duration of the proposed arrangement. Arnold Turley, a CFA Institute member, is a portfolio analyst at Mainland Securities. He was just elected to the Board of Directors for Omega Services, which pays him $1,000 plus expenses for attending each of its quarterly board meetings. Turley e-mails Mainland’s compliance officer informing her of this arrangement with Omega and receives a reply informing him that the agreement is acceptable. Did Brown or Turley violate CFA Institute Standards of Professional Conduct? A) Brown: Yes, Turley: No. B) Brown: No, Turley: No. C) Brown: Yes, Turley: Yes.

A, Brown should’ve informed the supervisor in writing.

A, I think It could be B because Turley didn’t get approval in advance if I am reading that correctly.


Your answer: C was incorrect. The correct answer was A) Brown: Yes, Turley: No. Brown violated Standard IV(B), Additional Compensation Arrangements, because she must disclose in writing other benefits to be received for services that are in addition to compensation conferred by her employer. Turley did not violate Standard IV(B) because he received consent from his employer in writing, which includes e-mail.