I have two questions here which I am confused about… John Elliot, CFA, says that in issues of ethics he always puts the clients first according to the guidelines in the Code of Ethics. In doing so he is: A)not correct, because his first duty is to the public. B)not correct, because his first duty is to his employer as long as the employer is enforcing the Standards. C)correct. D)not correct, because no such ordering or priority is given in the Code. Your answer: C was incorrect. The correct answer was D) not correct, because no such ordering or priority is given in the Code. Component one mentions duties to the public, clients, prospects, employers, employees, and fellow members. No ordering of priorities is given. I was going like wtf…aren’t we supposed to put client’s interest ahead of everybody else? I thought thats like the first thing thats told to us in this program… The second one: A CFA Institute member makes a recommendation of a stock in which his firm has a material ownership. He does not know of the material ownership at the time of the recommendation. A day later, he learns of the material ownership and immediately sends out an addendum informing clients of that fact. With respect to Standard VI(A), Disclosure of Conflicts, and Standard V(A), Diligence and Reasonable Basis, this is: A)a violation of Standard VI(A), only. B)a violation of both Standards. C)a violation of Standard V(A), only. D)not a violation of either Standard. Your answer: C was incorrect. The correct answer was B) a violation of both Standards. The member apparently had not exercised due diligence in making the recommendation if he does not know of the material ownership by his own firm. Even if the member did not know of the material ownership, Standard VI(A) was violated with the release of the recommendation. Standard V(A) violation without any doubt. But why is disclosure of conflicts a violation? He didn’t know about material ownership because he didn’t use diligence and reasonable care. But once he found out, he immediately informs. In this case, Standard V(A) supercedes Standard VI(A) right? "Even if the member did not know of the material ownership, Standard VI(A) was violated with the release of the recommendation. " is where I was going wtf…don’t get this part. Or am I just making things complicated for myself?
for 2) the disclosure of conflicts isn’t a violation, the recommendation without disclosure is the violation. Despite the prompt disclosure, it was still a violation to recommend the stock without a disclosure. 1) I don’t know, I haven’t re read them recently. But if the fiduciary duty to the client isn’t prime, then there is something wrong with the code…
hope that #1 trips up everyone. and now i guess we know, but i definitely thought there’s ordering (but i guess it’s not absolute is what they mean) … #2. whose violation? isn’t there a supervisor?? too vague the way it’s written. but he didn’t disclose a conflict, and the other one suggests he should have known about the conflict so it seems reasonable. they don’t seem to have any problems with piling on… i think this question would benefit from a bit more info and a bit clearer wording. is the “sending out an addenda” really meant as “this”, or the entire passage preceding the “this”. very poor english.
1 trips people up because it says Code of Ethics, not the Standards Does this make sense? Duties to Clients/Employers is one of the standards
I think D for question 1 is right. You wouldn’t trade for a client if he’s making it known that he’s trading on material non-public information. I picked D for question 2 also. I guess not knowing your own firm’s ownership stakes is a violation of due dilligence. In any case the question is horrible as it’s giving you the code number and letter but not the description.
As far as #2 I’ve seen a lot of questions where someone does something wrong and immediately corrects it. Its still a violation even if its corrected the next day.
rg6252a Wrote: ------------------------------------------------------- > 1 trips people up because it says Code of Ethics, > not the Standards > > Does this make sense? > > Duties to Clients/Employers is one of the > standards I believe you are correct. The Code of Ethics and Standards are two separate things (although they go hand in hand with each other).
thepinkman Wrote: ------------------------------------------------------- > As far as #2 I’ve seen a lot of questions where > someone does something wrong and immediately > corrects it. Its still a violation even if its > corrected the next day. would it be a violation if he’d made the effort to check and his compliance told him they don’t own it and then they back-tracked the next day?.. i.e. would he still be in violation that he didn’t disclose? because technically he didn’t, although his non-disclosure would have been “reasonable”… but yeah, fixing stuff doesn’t make up for the mistake, especially when you didn’t make the necessary effort (question doesn’t say that, but i guess we assumed)
Hmm…making sense little by little…thanks…