ethics question -

Nick O’Donnell, CFA, unsuspectingly joins the research team at Wickett & Co., an investment banking firm controlled by organized crime. None of the managers at Wickett are CFA Institute members. Because of his tenuous situation at Wickett, O’Donnell begins making preparations for independent practice. He knows he will be terminated if he informs management at Wickett that he is preparing to leave. Consequently, he determines that “if he can just hang on for one year, he will likely have a client base sufficient for him to strike out on his own.” This action is: A) a violation of his duty to disclose conflicts to his employer. B) not a violation of his duty to employer. C) a violation of his fiduciary duties. D) not in violation of the Code and Standards as the employer’s violations of the law absolve him from his ordinary duties to this employer under the Code and Standards.


Making preparations are not a violation of CFA Standards. When he builds up his client base, he can strike out on his own and take no client records with him (or any other employer property). But he may contact these clients through public records.


You are right making preparations is not violation. But, what about the last statement — “if he can just hang on for one year, he will likely have a client base sufficient for him to strike out on his own.” — Doesn’t this suggest he plans to steal clients from his current employer ?? and hence a violation.

Yeah but what about the organized crime part. He didn’t know when he joined but if he does now isn’t he in violation of C

having thoughts is not a violation. he may intend to take his employer’s clients, but not until he has completely left the company. At that point, you can contact your previous employer’s clients all you want as long as you’re contacting them using public records.

I believe the organized crime part is irrelevant in this question. The question is asking what about “this action” is true? The action being referred to is making preparations. Now, I also think he may be required to disocciate from any illegal activities, report this to the appropriate authorities, and possibly leave the company altogether if he cannot fully dissociate while at the company. But again, the organized crime part is irrelevant for this q. At least that’s what i think.

i share the same opinion as topher. Unless otherwise committed, its not a violation-like having a thought. Furthermore he can contact his clients from a public contact list which is also not a violation.

C. He knows he is working for organized crime and this is very relevant to the question and to his ethical conduct, IMHO.

What fiduciary duty has he violated according to your opinion? I suspect if this has anything to do with organized crime. This question is based on IV (A) and he is not in violation.

Only based on the requirement to comply with all laws and ethical conduct stuff. I’d be surprised to find that knowingly working for a group of organized crime members is not a violation of CFAI code and standards. “In relationships with clients, Members and Candidates must determine applicable fiduciary duty and must comply with such duty to persons and interests to whom it is owed.” “The duty required in fiduciary relationships exceeds what is acceptable in many other business relationships because the fiduciary is in an enhanced position of trust. Members and candidates must abide by any fiduciary duty legally imposed on them.”

The fiduciary duty in my opinion is with in the context of a relationship to the client and also in relation to the employer. If the offenses by the “controlling” people are severe, Nick has an obligation to report it to the authorities and I assume he would do it. . But the question doesn’t describe the offences by the controlling people to decide if the offenses need to be reported or not. Even if he violated a Standard, which standard is violated here?

he might also get whacked. you can’t violate any CFA Standards if you’re dead

The answer should be B. The key word here is “unsuspectingly joins”. There is no indication he is aware of any illegal activity and preparing to leave is not a violation

I would say the answer is C. This is violation of his fiduciary duties. Once a CFA member/candidate is made aware of illegal activites he must report it to compliance or seek outside counsel/guidance and if that help doesn’t go anywhere, he must DISASSOCIATE from work immediately. The fact that nick hangs around for 1 yr is violation for his fiduciary duty. Remember fiduciary duty is owned to the clients of this research firm. B is also a correct choice, but C IS MORE CORRECT in my opinion. what’s the answer please, thunder.

I disagree with C here. So what if the Ibank is owned by organized crime. Does that automatically mean the IBank itself is involved in illegal activities??? Maybe not. I don’t know whether we can really make this assumption. What if your current boss at a hedge fund was a pimp, but you didn’t know it. Does that make you in violation? It seems that his activities outside the office are irrelevant here. Although if these truths came to light it would most certainly have an affect on the business. Also unsuspectingly seems to be key here. I stick w/ B.


Thunder, can you please post the source of this question and the correct answer.

pepp Wrote: ------------------------------------------------------- > Thunder, can you please post the source of this > question and the correct answer. Thunder…we need your bless!