My question is in a group tour, what to accept? What to decline? Book 6-3-PM-8 Roger smith, CFA, has been invited to join a group of analysts in touring the riverboats of river casino Corp.(RC). For the tour, RC has arranged chartered flights from casino to casino since commecial flight schedules are inconvenient and not practical for the groups’ time schedule. RC has also arranged to pay the hotel bill for the three nights of the tour. The trip is purely business. Accoridng to CFA institute SPC, Smith: A. may accept the arrangement as they are B. may accept the flight but should pay his own hotel bill. c. must offer to pay for his share of the airfare and his own hotel bill. D. must decline to accept the trip because the arrangement are inappropriate. what 's wrong with A? I think he can accept the tour, according to the following example provided by the Handbook. on page 20. Example 1. Steven Taylor, a mining analyst with Bronson Brokers, is invited by Precision Metals to join a group of his peers in a tour of mining facilities in several western U.S. states. The company arranges for chartered group flights from site to site and for accommodations in Spartan Motels, the only chain with accommodations near the mines, for three nights. Taylor allows Precision Metals to pick up his tab, as do the other analysts, with one exception—John Adams, an employee of a large trust company who insists on following his company’s policy and paying for his hotel room himself. And the answer is Comment: The policy of Adams’s company complies closely with Standard I(B) by avoiding even the appearance of a conflict of interest, but Taylor and the other analysts were not necessarily violating Standard I(B). In general, when allowing companies to pay for travel and/or accommodations under these circumstances, members and candidates must use their judgment— keeping in mind that such arrangements must not impinge on a member or candidate’s independence and objectivity. In this example, the trip was strictly for business and Taylor was not accepting irrelevant or lavish hospitality. The itinerary required chartered flights, for which analysts were not expected to pay. The accommodations were modest. These arrangements are not unusual and did not violate Standard I(B) so long as Taylor’s independence and objectivity were not compromised. In the final analysis, members and candidates should consider both whether they can remain objective and whether their integrity might be perceived by their clients to have been compromised.
he can accept the tour… but I believe he must pay for the hotel himself.
I’m going to guess the answer is ‘C’ The analyst should offer to pay their own travel and lodging arrangements as it could infringe upon their Independence and Objectivity. If they do not have to pay for their own lodging or transportation, they can accept only if the accommodations are deemed to be ‘within reason’ (ie. no 5 star hotels when their are cheaper motels in the area) and is strictly for business use only. The fact that Adams was put in a MOTEL means that he is able to accept, as there is nothing stating what his company policy is in regards to accommodation. Taylors company doesn’t allow any sort of accommodation arrangements by the other company, so he must follow policy and not accept.
cpk123: your answer is consistent with the answer given by SW. but why hu MUST pay for hotel? the question speficies that the tour is purely business. In the Handbook example, the analyst also allowed the company “to pick up his tab”, and CFAI said it is not necessarily a voilation, “so long as Taylor’s independence and objectivity were not compromised”. So why he MUST pay for hotel?
He can accept the flight, because flights are otherwise inconvenient. So there he has no choice, and everyone would be given the same treatment (all other analysts like himself, no special favors can be provided because it is a common service). Hotel bill – if the RC decided to favor a few with better “accomodation” in a bid to woo them to “recommend” their firm, objectivity could be compromised. Hence in this situation, it is better for Roger to foot the bill himself. HTH. CP
just to add another wrinkle here, if the question didn’t explicitly mention that commercial transporation doesn’t jive with the group’s plans, then it would be inappropriate for the analyst to use client transprtation. Rule of thumb , if commercial transporaion can get you there, you should use that. In the example with the analyst flying to a remote part of the world, it’s ok to use client triansportation, since no commercial flights are available. So it’s a completely different story. When reading questions like that, always try to access whether the analyst’s objectivity might be impeded, or whether it might SEEM that is the case. It’s not only about whether it can happen, it’s also about whether others might think it might be happening.