Ethics confusion

Gregor Pavlov, CFA, is a fund manager working for the general partner of a new private equity fund. Pavlov includes in the fund marketing material his performance history from his previous employer. He received permission from his former employer to take his historical return figures and the supporting research reports he used to make the related investment decisions. Did Pavlov most likely violate the CFA Institute Standards of Professional Conduct?

Yes, with regard to Record Retention No Yes, with regard to Loyalty

Came across this on the CFAI topic exams. Correct answer is A - I chose B “No”

I am confused as to why. No where in the statement does it mention anything about not retaining his records from previous employer.

Answer Explanation:


Even though Pavlov had his former employer’s permission to take his performance record and supporting research reports with him, he does not have the underlying performance data to support those historical return calculations and is, therefore, most likely in violation of Standard V©–Record Retention. Pavlov had the permission of his employer to take his historical performance record and research reports with him when he left the firm, so he is not in violation of Standard IV(A)–Loyalty.

CFA Level I “Guidance for Standards I–VII” Standard V©–Record Retention

Could someone please elaborate. Thanks!

Outch that a tricky one !

Its a bit of a stretch, but I believe the justification is that retaining records is generally the responsibility of the firm as a whole, not the individual. And in this instance, the previous firm would have still retained the records, he wouldn’t technically have taken them with him even if they gave him permission. So I think you are meant to assume he couldn’t have the back up info.

reread the first sentence in the question. “New” hedge fund.

Can you set up a company today and claim that you have 10 years of performance history built up in your previous firm ? What records have u retained?

nothing right? thats the answer

If anything it seems more like it would be misrepresentation for him not quoting the fact that it was from a previous employer, despite having the employer’s permission to use. All in all - bad question. I wouldn’t worry about that one too much.