Fraser Booth is a Level III CFA candidate working as a research analyst at Superior
Investments, an asset management company domiciled in Country A. Local securities
law prohibits firms and employees of those firms from holding, purchasing or otherwise
trading in securities that have published recommendations regarding those securities.
Booth attends a research seminar covering several topics regarding all of the utilities in
Country A’s economy. Two topics of interest to Booth address regional utilities, which
typically pay large dividends, and the impact that a proposed tax rate change might
have on the future payment of dividends. While tax rate changes have yet to be
confirmed, Booth lowers the price targets on the most prominent utility in Country A and
the other utilities he covers, citing concerns on potential tax rate changes without
attributing the source in the research reports.
Michael Grodi, Booth’s roommate, works for an events firm that promoted and
sponsored the research seminar attended by Booth. Grodi requested Booth’s expertiseon social media’s so-called “viral” promotions. Booth agreed to help Grodi’s business and received payment for his services. Booth’s work for Grodi occurred outside the normal work hours of his current job.
Question is Booth’s work for Grodi most likely:
A. does not violate the Standards.
B. violates the Standards on opening competitive practice with his employer.
C. violates the Standards because Booth did not receive prior approval from
his employer.
Answer is A. Justification is "Standard IV(A) is the requirement that members and candidates abstain from
independent competitive activity that could conflict with the interests of their
employer. Booth’s work for Grodi’s event firm occurs outside his work hours. It is
strongly recommended that Booth obtain permission from his employer. "
I assume there is a typo here and they meant for C to be the correct answer. Even if this was a typo, I am not understanding what out of office hours versus in office hours has to do witht he problem here. The issue is that Booth attended a research seminar that he appears to be paid by the organizers to do. Isn’t this a conflict of interest problem? (My answer was C in any case)
It doesn’t say? I just assumed it would be a conflict of interest if Booth is attending a seminar sponsored by the event organizers that that would be a problem?
the full text is here.
“Fraser Booth is a Level III CFA candidate working as a research analyst at Superior
Investments, an asset management company domiciled in Country A. Local securities
law prohibits firms and employees of those firms from holding, purchasing or otherwise
trading in securities that have published recommendations regarding those securities.
Booth attends a research seminar covering several topics regarding all of the utilities in
Country A’s economy. Two topics of interest to Booth address regional utilities, which
typically pay large dividends, and the impact that a proposed tax rate change might
have on the future payment of dividends. While tax rate changes have yet to be
confirmed, Booth lowers the price targets on the most prominent utility in Country A and
the other utilities he covers, citing concerns on potential tax rate changes without
attributing the source in the research reports.
Booth has always been bullish regarding the Country A economy’s ability to grow, but
during the conference, a highly regarded economist’s presentation convinces Booth that
his growth assumptions may not materialize. Consequently, Booth modifies his research
reports and cites the economist’s presentation as the reason for his change of outlook.
Booth’s uncle, who currently is a board observer at one of the utilities, agrees with the
conclusions of the report. Booth’s uncle has an account at Superior and is the reason
Booth personally holds shares on the most prominent utility in Country A.
Michael Grodi, Booth’s roommate, works for an events firm that promoted and
sponsored the research seminar attended by Booth. Grodi requested Booth’s expertise
on social media’s so-called “viral” promotions. Booth agreed to help Grodi’s business
and received payment for his services. Booth’s work for Grodi occurred outside the
normal work hours of his current job.”
First of all, I do not believe for one instant that Booth is a Level III candidate. If he were, he would be studying during his off hours, not doing dome stupid consulting gig.
Second, it sounds as though you’re not sure whether or not it says that Superior Investments offers consulting services in viral promotion. (You wrote it with a question mark.) It doesn’t.
Third, he’s free to do whatever he wants to outside normal business hours as long as it doesn’t compete with his duty to his employer, which includes getting paid for providing services his employer doesn’t provide. (I, for one, taught university mathematics whilst I was working at PIMCO: no conflict.) It’s probably a good idea to get permission from his employer (PIMCO insisted on it, for example), but it isn’t necessary to comply with the Standards.