Ethics - EOC questions

  1. I just finished the Reading 2, code and standards, end of chapter questions. For those of you who have already done them, do you think they will be representative of the actual level III stuff? I ask because I did much better than I thought I would (and much better than I was scoring on schweser). 2. There is one EOC question that I just can’t believe the answer to and need some explanation. Page 130 of book 1 CFAI text, question 58. I am hoping maybe you have already worked it out and can punch holes in my logic. I went with C while the answer is A. I know I am asking you guys to open up the book here, but it is a CFAI vignette and I don’t want to/don’t know if I should reproduce the question here. I also have the flu. I am pretty sure it is not of the swine variety though. I study anyway. Thanks in advance!

C is wrong.

Thank you, Lazlo.

Seriously. You know that was a little funny. Anyway. Since they included “Komm… has several well-managed proprietary funds” and “After a thorough search process… hired” I was inclined to go no violation there. Disclosure of conflicts has potential but it seemed to pass the smell test. If it was his brother in law, he just got into the business, Riser owed him money, and there was no search process… well, yeah. But he just threw his name in the ring and the process was thorough.

If you look at the spirit of the disclose standard, it basically says that you should disclose and let the client or employer judge if there is a conflict for themselves. In this case the guy had JUST offered him a position as a managing partner of his firm. When I read it I knew the guy was qualified and they still vetted him, but in my book he still should have disclosed the fact that the guy just offered him a job. What about my first questions…your thoughts?

I can’t really say. I haven’t done these yet. Plan to though towards the end of may for a final dust-up of ethics and then gips.

I hope they are representative of the real exam. I had a similar experience with doing well on the EOC questions as compared to the schweser questions. As for #58, I originally answered A. My logic was as follows: Although a job offer was originally extended, Riser declined the position. Therefore I don’t see how Riser would benefit in any way by recommending Komm’s firm. I could see a conflict if Riser was trying to get a job with Komm and thought that by sending a client his way, that would help. But he was already offered a job, and declined. I did not see anything that would effect his objectivity. Although I suppose a case could be made for Riser thinking he “owes” Komm for the job offer, but with all things considered and there was no mention of anything other than Riser declining the offer and stating that he is very happy working at Swibank, I still think no violation. …yea, ethics sucks.