Vol 1 Pg. 131 Q 61: Riser is not required to disclose to clients his: 1. holdings of the japanese equity product 2. relationship with the swibank subsidiary 3. compensation from the swibank subsidiary Answer: C is correct. Standard blah blah Disclosure of Conflcits requires that members and candidates make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients, and their employer. Riser’s holdings of the Japanese equity product and his position on the board of the subsidiary’s could impair his objectivity and must be disclosed to clients. “He need not disclose his compensation from the subsidiary because it is not a referral fee.” I cannot seem that justify that last sentence…will someone clarify that?? If he has to disclose his relationship, how is it that his compensation from this position as a director does not need to be disclosed…and what the heck does referrral fee have to do with this?
i hate this vague stuff… gimme a multi-currency attribution or a butterfly spread any day. So you disclose everything just to be safe - and get it wrong!!! nasty
null&nuller Wrote: ------------------------------------------------------- > i hate this vague stuff… > gimme a multi-currency attribution or a butterfly > spread any day. > So you disclose everything just to be safe - and > get it wrong!!! > nasty I hate these Ethics Qns too … unfortunately I also hate the multi-currency attribution
ok…turns out i might have figured out the answer to my own question…someone needs to confirm if my thinking is correct though… so … the dude is not REQUIRED to disclose his compensation with the swibank subsidiary because it is not necessarily a conflict of interest which the client would need to be aware of … since his independence and objectivity in handling their investments would not be affected by his board membership of this subsidiary… also …this compensation is not a referral fee…in the sense that he’s not being paid to be a board director for having recommended a particular product or security…he is being paid to advise management on business strategies, market opp, potential clients, and current and prospective fund managers…in general… as far as disclosing his relationship with the subsidiary is concerned however…he would need to disclose this as it would take mean taking some time out of his duties as a managing partner at Komm pvt mgmt.?? and therefore clients would need to be aware of that?? does that make sense?? hate this shite!
makes sense … Compensation includes direct and indirect compensation from a client and other benefits received from third parties… third parties here would be parties who may a conflict of interest.
Mary Hiller, CFA, is a senior analyst at a mutual fund. She is also a member of the Board of the Directors of her daughter’s Skating Club. She is often asked for advice about the management of the club budget and about possible short-term investments, but she is not paid for this advice. She does not undertake any research to answer these questions, providing information based only on the general practices of the mutual fund at that moment. The only benefit she receives is a free monthly membership for her daughter that would usually cost $182. What should she do before making any recommendations, in order to comply with the CFA Institute requirements? A) Inform her current clients about her outside consulting. B) Consult only on her free time and do not accept any benefit greater than $100. C) Obtain prior permission from her employer The answer is C. I think it should be both A and C. Isn’t there a conflict of interest and so the need to inform employer. I got it right but I choose C due to lack of a choice which says inform all parties.
the question asks what she should do BEFORE making any recommendations…so I think C is most appropriate… 1. she needs to get written permission from her current employer - because in a sense she is getting “compensated” for providing these services - the $182 discount. 2. If employer permits and she is providing advice to the club … THEN she would need to inform her clients about her outside consulting arrangement - to avoid conflict of interest. B is not appropriate because the $100 rule doesn’t apply anymore…(read that somewhere in the cfa books earlier today)…so any gift/benefit/compensation needs to be disclosed etc.