Jason Blackwell, CFA, works as an investment manager for Mega Capital, a large multinational brokerage firm. He resides in a country whose applicable law is stricter than the Code and Standards but does business with clients in a country whose applicable law is less strict than the Code and Standards. Blackwell decides to follow the Code and Standards for clients in the less strict country. While Blackwell is still employed at Mega, Lego Associates verbally asks Blackwell to review client portfolios during evenings and weekends for a fee. Blackwell gets consent from his immediate supervisor at Mega to undertake this independent activity for a one-month trial basis. Which of the following statements about Blackwell’s actions involving Standard I, Professionalism, and Standard IV(A), Loyalty is most accurate? Blackwell: A) did not violate either Standard I or Standard IV(A). B) violated both Standard I and Standard IV(A). C) violated Standard I but did not violate Standard IV(A). D) did not violate Standard I but violated Standard IV(A).
yes heha you are correct. But, if say you are working for firm in US and have a client in Cyprus. And Cyprus law is less strict than US, US law stricter than Code and standards. Then following Code and standards will be violation ???
in other words what will you do to not violate standards. max(US,Code,Cyprus) ??? or max(Code,Cyprus) —> as client is in Cyprus
- No violation of IV(A) because he got permission, and I guess permission does not have to be in writing (is this always the case?) 2) Standard I should apply when in conflict between strict and less strict. In this case, the law in his country is more strict than the standards, but we are not told what the law in his country is in this regards! 3) It is possible to take the words “Blackwell decides to follow the Code and Standards for clients in the less strict country,” and as a violation right there, but that’s a ridiulous way of framing this problem, and even then this should not indicate a practical violation. Comments?
go back to CFAI book 1 page 20 there is a clear table for all situations if there is a law stricter than code and standard, we follow the stricter law unless stated.
What was the stricter law in this example? What did it require him to do in this situation?
“He resides in a country whose applicable law is stricter than the Code and Standards” more strict > Code and Standards > less strict
You are not answering my question.
The law is not explained in the question. What we know about the law is “applicable”.
Thts true heha, but what do you do if your office is in Country 1, you work for an client in country 2 and Country 1 law > Code of ethics > Country 2 law will you abide by Country 1 law (where your office is located) or Code of ethics ??
Country 1 law If Country 1 law states that Country 2 law governs , you have to follow Code and Standards since Code > Country 2 law Go read the book. It’s a lot clearer than what I said
So what you are saying is that the problem really says that he resides in a country whose applicable law *for all cases* is stricter than the code and ethics! C’mon, this is always case by case, no? Isn’t this also a more direct violation? "… “Blackwell decides to follow the Code and Standards for clients in the less strict country”.
If the stricter law doesn’t exist, he doesn’t violate the Code and Standards.
> If Country 1 law states that Country 2 law governs , you have to follow Code and Standards since Code > Country 2 law That’s correct per CFAI code and standards. But do you see the vicious cycle in this? You are supposed to abide by the most strict. the most strict says follow country 2’s laws. You violate that and abide by the code and standards. But the code and standards says “abide by the most strict!”. And the most strict says “go ahead and follow country 2’s law”… go figure.
This is a great question. I just took the same question, and got it wrong. The bottom line is that the applicable law in this case is stricter than the Code of Standards, and he must adhere to the more strict applicable law.
following the code and standards doesn’t mean violating country 2’s law following country 2’s law means violating the code and standards
Great discussion, but I think the reason © is chosen is because of the following obvious violation: “… Blackwell decides to follow the Code and Standards for clients in the less strict country”. Where in the standards does it say you can do that? That’s how he violated Standard I.
C, Dreary’s reasoning pointed well the violation.
And to add more confusion to the situation read this again: “Blackwell decides to follow the Code and Standards for clients in the less strict country” 1) Does this say that Blackwell decided to follow the laws of the less strict country? OR 2) Does it say that Blackwell decided to follow CFAI’s Code and Standards in its treatment of cases involving less strict laws? It’s a word game, but I’m leaning towards 2)! The good thing is that real exam questions should be more carefully written.