Brian Bellow, a CFA Institute member, is a portfolio manager for Progressive Trust Company. Several friends asked Bellow to review their investment portfolios. On his own time, Bellow examined their portfolios and made several recommendations. He received no monetary compensation from his friends for his investment advice and provided no future investment counsel to them. According to CFA Institute Standards of Professional Conduct, did Bellow violate his duty to Progressive Trust? A) No, because Bellow provided no ongoing investment advice. B) No, because Bellow provided investment advice to his friends. C) Yes, because he undertook an independent practice that could result in compensation or other benefit to him. D) No, because Bellow received no monetary compensation for his services.
my guess is D, maybe B…
I say D.
I thought D. Answer is C. I don’t get it, should we disclose anytime we help others out with an investment related question? Guess we can’t shoot the breeze over drinks anymore.
n/m
that makes no sense “He received no monetary compensation” <> “could result in compensation” Plus he did all this “on his own time.” was that in the CFAI text or 3rd party notes?
That’s fugged up yo. Sounds like a mistake to me.
I think C is not a mistake. It deals with Standard IV Duties to Employer (A) Loyalty. The investment advice to friends is in fact an independent practice - even if unpaid for, and undertaking it without prior approval from the employer means “engaging in competitive business”, and delivering a service “that the employer currently makes available for remuneration”. Check on Volume I, p.70.
I guess in a way it is ‘competitive business’ in that Bellows’ friends would otherwise potentially be paying for a similar service, and thus it could be considered lost revenue…maybe the fact that it says “several” friends as opposed to a single ‘close’ friend or single family member also plays a part. holy grey area batman.
Pretty little thing called Ethics:)
even if C is the CFAI answer it is still retarded
Ah, but I think this statement here is key: “He received no monetary compensation from his friends for his investment advice and provided no future investment counsel to them.” I wouldn’t call this ‘undertaking an independent practice’. Seems a tad overblown to me. I’m still sticking with D. 
Well, yes, but compensation could come in different other forms. And Bellow deprived his employer of the compensation it would have probably charged for his services. I’ll stick with C:)
I think you have to look at the definition of Standard IV on Loyalty to understand the reasoning for C. “Members and Candidates must place their employer’s interest before their own and must not deprive their employer of their skills and abilities, divulge confidential information, or otherwise harm their employer.”
He did not deprive his employer of his skills and abilities - he did this on his own time divulge confidential information - question says nothing about this, so there is no reason to infer otherwise or otherwise harm his employer - since this was a non-reoccurring event, it sounds like his friends would not have paid for services anyway…
map1 Wrote: ------------------------------------------------------- > Well, yes, but compensation could come in > different other forms. And Bellow deprived his > employer of the compensation it would have > probably charged for his services. I’ll stick with > C:) The thing is, he is not ‘setting up shop’ for the purposes of intentionally going into competition with his employer, it was a one time friendly consultation and it clearly states he provided no future counsel to them. He behaved ethically, isn’t that what we’re (they’re) striving for? I can’t imagine what kind of a world it would be if everyone followed this type of rule. I’d have no friends! It would make the candidate/member come off as being quite the dick, in my humble opinion, and would also reflect poorly on the profession. “I’m sorry, but I cannot review any of your portfolios and make any type of recommendations as CFA Institute considers this to be a direct violation of the “Duty to Employer” Standard. But you’re all more than welcome to step into my office, pay an exhorbitant fee to me/employer, and we can chat all day long!” What happened to the whole ‘spirit of the law vs letter of the law’ thing?
eric23 Wrote: ------------------------------------------------------- > I think you have to look at the definition of > Standard IV on Loyalty to understand the reasoning > for C. > > “Members and Candidates must place their > employer’s interest before their own and must not > deprive their employer of their skills and > abilities, divulge confidential information, or > otherwise harm their employer.” It is still possible for his friends to act on the information and then compensate the friend later down the road. If that is the case then he has breached his loyalty to his employer.
The way out would be to first report to the employer on the services required from him (one time advice) and compensation (nothing), and provided Bellow receives employer’s approval, he can advice his friends that one time. As eric23 said, compensation could come later on, not necessarily monetary. Not to mention, it was not a one time occurrence (it was indeed one time, but for for several friends, that is “several recommendations”).
This was the advanced question in the Qbank. I can see why, very tricky.
interesting…i thought D as well. I will keep this question in mind for the June exam.