if client A pays for a vacation for an advisor if they hit a certain return, and the advisors supervisor approves of this arrangement, is the advisor required to tell other clients about this arrangement? or only if they ask? Can the advisor keep this agreement confidential if she wants to?
Definitely can’t keep it confidential. I can’t say for certain about your other two questions.
nopes, I don’t think, there is any need to disclose it to the clientele, since he got the approval from the supervisor, it’s left up to the company to decide weather the advisor is favoring the client, because of the gifts he received from him.
i agree with dinesh, the standards do not require you to disclose additional compensation to other clients
Sorry, I thought you meant confidential from your employer.
He’s receiving compensation from the CLIENT, not another FIRM/COMPANY/IB/UNDERWRITER trying to influence his recommendation.
thanks guys. I find some of this additional compensation stuff tricky and don’t want to get tripped up in the subtle dos and don’t on exam day. The below is a note that I made to myself following an advanced schweser ethics questions I didn’t get right: “Gifts from clients as a reward for past performance is ok as long as disclosure is given to employer, employer cannot tell you you can’t take them. Proposition of gifts from clients for future performance is ok as long as disclosure is given and permission has been given from employer. Proposition of gift for future performance is different than gift for past performance as it’s seen greater risk for affecting objectivity, and could create a conflict of interest when taking investment action on these accounts.” I found the first part a bit odd (that an employer can’t tell you you can’t take a reward for good peformance that has already happened) but the rest is fairly straightforward.
The idea is that if a client give you a gift based on PAST performance it isn’t really an issue because it won’t affect your impartiality going forward. It needs to be disclosed to the employer, but permission isn’t needed. If a clients is going to pay your for beating a benchmark going FORWARD then you need to get written permission from the employer because that deal MAY impact your objectivity.
I guess the angle that i was thinking about this from was the idea that a reward for past performance could affect impartiality going forward b/c you know this client is more likely to give a similar reward again as opposed to a client who gave you nothing. it could be argued that an advisor would treat a client who gave her a BMW differently and affect impartiality than a client who gave her nothing. I probably would. anyways, i’ve beaten this topic to death, moving on to QM…