Richard Chambers … Lives in Botwari, works for a US firm. To develop a strong client base, Chambers follows firm practices and take advantage of a local law allowing brokers to pay prospective clients as an inducement to gain their personal business. Chambers sometimes pays local accountants significant sums for referring wealthy clients to him as well, and he discloses this to the clients. Has Chambers violated the Standards of Professional Conduct?
A. No
B. Yes, Chambers is violating US law, which puts him in violation of the standard on misconduct.
C. Yes, Chambers has violated the Standard on referral fees.
So I put (B), as the standard states that we have to follow the stricter of local law, US law, and the code/standards. But the answer key says the answer is (A). Am I not right in thinking that the key is completely wrong on this one? Or is that not actually a US law he’s breaking and so the question is just a trick question? My first thought was that its because its not a violation of misconduct specifically, but the question is asking if he has violated any standards, so it has to be yes (and its not C, as long as he discloses)
This is a bit bizarre but if I was faced with a similar problem on the real exam my reasoning would be :
Discard C)
B : The question never mentioned that a US law is being broken. Furthermore, I can’t possibly be expected to know whether such a law even exists in the US.
The question states that he follows the firm’s practice and since the firm is Us firm which probably means it has to follow US regulation, so he does not break any US regulation. so A… but I agree, it’s very tricky !
I went with A only because of this statement —> ‘he discloses this to the clients’.
The question’s focus is the referral fees. and under conflicts of interest: referral fees - members must disclose to employer, client, future client about any sort of fees or compensation they are recieving.
Also, the question doesn’t even mention anything about US laws and him breaking it, so can’t be B.
Vicky syllabus changes from year to year and so have to be careful about which year mock you are taking. If you havent even heard of this, then probably out of syllabus. But I know drain stuff was in syllabus around 2010 when I took level 1.
Schweser explains the answer no? Or is that just on their mobile app? Use your tablet/smartphone to download the app and check the answer. (app exists onyl for idevices and android devices)
My reasoning is that B is a trick answer because we can’t be assumed to know of any such laws. C is close to correct, but because of the wording of the question, it seems like it’s okay for him to disclose it and not violate any standard because he is following firm practices, but that’s a stretch. So it only leaves A.
They do explain the answer, but don’t do a very good job at it. It’s just the wording sounds like paying clients is illegal in US, and therefore would be a violation. Guess not…
