Black and Wood have been working closely to service a number of clients. Wood knows that Black recently met with a prospect named John Talbert. Black says that she received Talbert’s paperwork and made a recommendation to Talbert to which he agreed. Black tells Wood to execute the trade. Wood has not seen the final paperwork, but from what he knows, the trade is congruent with Talbert’s situation. Wood also knows the recommendation is generally a sound one. With respect to Black’s instruction to execute the trade for Talbert, according to the Standards, Wood should: A) execute the trade only after consulting the firm’s legal counsel. B) execute the trade immediately. C) not execute the trade because he has not met Talbert himself. Your answer: C was incorrect. The correct answer was B) execute the trade immediately. Since Black is Wood’s supervisor and has the CFA designation and Wood sees nothing wrong, Wood has no reason to take any intermediate action. _________________________________________________________________ So we are supposed to assume: 1) If your supervisor is a CFAI member s/he is always correct in asking you to trade a stock for somebody whom you have not met?? 2) What if the supervisor was not a CFAI member? Thanks
Was there more to the question? It sounds like Black is the account manager and Wood is just the person executing the trade.
Joni Black, CFA, works for a portfolio management firm. Black is a partner of the firm and is primarily responsible for managing several large pension plans. She also is in a supervisory position with several research analysts reporting directly to her. Dave Wood is a research analyst who has worked under Black for the last six years. Wood recently completed the Level III CFA exam and is anxiously awaiting the results. As a display of confidence, Black shows Wood a box of business cards that have already been printed up for Wood with the initials “CFA” after his name. She locks them away in a file cabinet and promises to deliver them on the day they get the news of his passing the exam. Black and Wood have been working closely to service a number of clients. Wood knows that Black recently met with a prospect named John Talbert. Black says that she received Talbert’s paperwork and made a recommendation to Talbert to which he agreed. Black tells Wood to execute the trade. Wood has not seen the final paperwork, but from what he knows, the trade is congruent with Talbert’s situation. Wood also knows the recommendation is generally a sound one. ________________________________________ This is all that relates to this question of the vignette. Thanks for your comments…
Wood really isn’t in a role where he would be questioning trade decisions.
Thanks. If this question was included in an IPS for a HNW individual then wouldn’t he be violating the standards of not checking/reading the client IPS?? I understand what you mean by not in a role to question and just trade as directed. But he is a research analyst and not a trader?? May be i need to stop reading any more IPS for few days =/
wood has worked for black for 6 years and we are told that Black has the paperwork and has made the recommendation and that wood generally agrees (even tho he hasn’t seen the IPS, etc). Just because wood is a cfa candidate (or even if he were a charterholder) does not mean he has to re-invent the wheel and re-open every IPS and every recommendation made by his boss. I would say that unless there is evidence that would lead wood to reasonably expect the recommendation is unsuitable - then he should just get on with it. + also he can’t use the business cards until he actually gets the charter, not when he passes level 3 exam. (1 could be wrong - i’m hopeless at this ethics stuff)
thanks null&nuller. “Woods has a reasonable basis that his supervisor is not dumb.” =D i think you are right with Ethical violation as well.
put it this way - wood should reject the null hypothesis that the boss is a moron…
Woods is good at not making Type I error =) edit: or is he good at not making Type II =( … i am tired… no more study tonight!!