Ethics - Additional Compensation Arrangements

Karen Dalby, CFA, volunteers on her church’s finance board but receives no cash compensation so she does not report the arrangement to her employer. Board compensation is limited to an annual retreat to Hawaii, but the accommodations are modest. Dalby does not enjoy the retreat and often considers skipping the event entirely.

Q: Is Karen in violation of CFA Standard ?

I would say yes: even though there is no compensation, there might be a significant time commitment, which would interfere with her job duties. She has to disclose it to her employer.

It needs to be disclosed to her employer. A church’s finance board could mean managing or overseeing a 10M portfolio. Non-cash compensation is still compensation that needs to be disclosed.

For the exam, No volation because no cash comp and not in direct competition with her employer.

One of this tricky questions where as in the real world you would probably just cover it with your employer anyway to avoid any doubt.

^ I agree

There’s not a all of substance in this question that would flag a violation. A lot of the responses from above are based on assumptions not actually presented.

The answer from Kaplan Qbank shows it’s violated. Rationale as Julia explains.

interesting…

It has to be reported to the employer because it has to do with investing (she could front run) and because a trip to Hawaii has the possibility to “have the appearance” of compensation. I would view that as compensation. I would have to work a month to pay for a Hawaii trip. The “does not enjoy” has no bearing on wheither it is considered compensation to an unbiased outside observer. This is my third and final attempt at Level 3. Last year I ran out of time on the morning essay and left half blank. Good luck everyone.

It has to be reported to the employer because it has to do with investing (she could front run) and because a trip to Hawaii has the possibility to “have the appearance” of compensation. I would view that as compensation. I would have to work a month to pay for a Hawaii trip. The “does not enjoy” has no bearing on wheither it is considered compensation to an unbiased outside observer. This is my third and final attempt at Level 3. Last year I ran out of time on the morning essay and left half blank. Good luck everyone.

Interesting…

Anybody else want to back up what I’m saying? She’s advising the church what to do with their money, she’s giving investment advice even if it’s to keep it in cash. It’s not the church “flower” committee, it’s the “finance” that flags it. What if the church is the Vatican and they are moving billions of dollars?

Maybe I’m reading too much into it, let me know if you think I am. I read up on some stuff and it talks about competitive practices, maybe I am over thinking it.

I love these vague questions that don’t test if you know the rules, they test how much do you want to infer.

Infer too much and you’re wrong, don’t infer enough and you’re wrong again.

Unlike in real life, you get all the facts, all the facts you actually need, and then you make a determination.

I just need to ask her what does she actually do at the board meetings, and that should give any investment advice. She might even pick stocks for them, at which point the employer might want to get statements so they can make sure she’s not front running.