How do we decide whether $75 is token or material??? Cynthia Abbott, a CFA charterholder, is preparing a research report on Boswell Company for her employer, Capital Asset Management. Bob Carter, president of Boswell, invites Cummings and several other analysts to visit his company and offers to pay her transportation and lodging. Abbott declines Carters offer but, while visiting the company, accepts a gift from Carter valued at $75. Abbott fails to disclose the gift to her supervisor at Capital when she returns. In the course of the company visit, Abbott overhears a conversation between Carter and his chief financial officer that the companys earnings per share (EPS) are expected to be $1.10 for the next quarter. Abbott was surprised that this EPS is substantially above her initial earnings estimate of $0.70 per share. Without further investigation, Abbott decides to include the $1.10 EPS in her research report on Boswell. Using the high EPS positively affects her recommendation of Boswell. Which of the following statements about whether Abbott violated Standard V(A), Diligence and Reasonable Basis and Standard I(B), Independence and Objectivity is TRUE? Abbott: A) violated Standard V(A) but she did not violate Standard I(B). B) violated both Standard V(A) and Standard I(B). C) did not violate either Standard V(A) or Standard I(B). D) did not violate Standard V(A) but she violated Standard I(B). Your answer: B was incorrect. The correct answer was A) violated Standard V(A) but she did not violate Standard I(B). Abbott violated Standard V(A), Diligence and Reasonable Basis, because she did not have a reasonable and adequate basis to support the $1.10 EPS without further investigation. By including the $1.10 EPS in her report, she did not exercise diligence and thoroughness to ensure that any research report finding is accurate. If Abbott suspects that any information in a source is not accurate, she should refrain from relying on that information. Abbott did not violate Standard I(B), Independence and Objectivity, because the gift from Carter was merely a token item.
I thought the limit was $50?
Did not violate standard I(B) because the gift must have material value in order to bias the reccomendation of the analyst.
From Series 7 land, it’s $100…
I saw many references for token items @ $100 (kind of a general consensus).
Ooops. I think our firm says $50. Darn compliance.
soxboys21 Wrote: ------------------------------------------------------- > From Series 7 land, it’s $100… Too good. I remembered it as $100 from that too.
Well, you have to comply with the strictest report the snack stack that you receive and is worth $51!
On a serious note, how wud you guys approach this question? On the basis of a gut feeling?? or is there a threshold?
In the CFAI text no, there is no limit set.
Agree with map… It has to be seen in the context.