Robert,CFA, is a porfolio manager. In appreciation for his impressive portofolio returns last year, one of his clients, Kevin, invited him and his wife for a major league baseball playoff game. He accepts and attends the game. The next day, he discussed the outcome of the game with his supervisor but doesnt mention the fact that he attended the game with a client. According to CFA Institute Standards of Professional conduct, his actions: A. vioated both I(B) Independence and Objectivity and I(A)Knowledge of the Law B. didnt violate I(B) Independence and Objectivity and I(A)Knowledge of the Law C.violated I(B) Independence and Objectivity but not I(A)Knowledge of the Law D. didnt violate I(B) Independence and Objectivity but violated I(A)Knowledge of the Law The answer is A. I chose C. Why did he violate the Knowledge of the law? is he required to disclose any activity with the clients by law??? confused… I need help! Thanks!!!
he should’ve known to inform his boss before he went for the game. That is the Law per the Ethics standards? Independence and objectivity is violated because he is in a compromised situation because of accepting the gift from the client without supervisor approval.
yeah, i guess you are right. In that case, am i right to say that CFA cannot have any social interactions with clients at all without supervisor’s approval?
They can as long as they are reasonable, a lunch or a dinner perhaps
Independence and objectivity and knowledge of the law both fall under the same Standard I. Independence and objectivity states - inform Supervisor about the circumstances (get written approval) and then proceed. Onus is on the supervisor to determine if there is any violation or if any independence and objectivity is being compromised and then to give permission.
Does this mean that any standards violation will automatically ALSO be a violation of knowledge of the law? For instance, if someone front-runs a client order and violates Fair Dealing would they then also be automatically violating knowledge of the law as well?
not sure we can generalize…
where did u pull this question? I dont see how he violated knowledge of law… he violated some other standards but i dont think knowldge of law is one… And how is I.b violated? in that his independence and objectivity is not compromised by accepting a gift…
jackoliver Wrote: ------------------------------------------------------- > Does this mean that any standards violation will > automatically ALSO be a violation of knowledge of > the law? > > For instance, if someone front-runs a client order > and violates Fair Dealing would they then also be > automatically violating knowledge of the law as > well? That’s what I thought to jackoliver. But seems like the main thing they want us to know out of “Knowledge of Law” is that you follow the more strict laws. But in the summary of Knowledge of Law, it says that candidates and members must comply with all laws, regulations and Codes and Standards to do with their professional activities. So to me, it sounds like if you violate the codes and standards, then you automatically violate knowledge of the law as well. Could anyone clear this up please? Also, he violated this because he didn’t disclose it as an additional compensation agreement (it’s with his client) so how come he violated independence and objectivity?
Isn’t this a “reasonable” social interaction/form of additional compensation? If he had gained approval from his employer, I don’t see why it would be wrong as long as he never provided favorably treatment to this client going forward
I don’t think there is such a thing as a “reasonableness” exemption - you have to get written approval for everything. CFA ethics standard = ass.
I have seen this question too. Forgot where it is from. I remember the answer explains the fact that he knowingly hid the baseball game is a violation of knowledge of the law. This explanation seems to be highly subjective too me, just as all other ethics questions. Also, I wonder if this is additional compensation, or just a gift to show gratitude. Robert will do the work anyways without the baseball game, so I do not think it belongs to additional compensation. And I cannot see how a baseball game can injure his independence and objectivity. This gift does not involve any promise of future performance. I would have even gone with B if it is not the tone of the question shows some disapproval.
I’ve been to baseball games, hockey games, football games, etc with brokers and clients. Who cares? (Not playoffs, but I missed the ethical distinction about playoff games in the Code).