The following information concerns two analysts at Mega Securities Company. * Mega recently hired Ron Anderson, CFA, who was previously an independent investment advisor. Anderson wants to keep his existing clients for himself and obtains written consent from Mega to do so. He also informed and received consent from his existing clients in writing about his new position at Mega. * Brenda Ford, a CFA Institute member, has been a full-time analyst for Mega for 12 years. She recently started providing investment services, which compete with Mega, to private clients on her own time. Ford obtained written consent for this arrangement from her direct supervisor at Mega. Ford has not disclosed to each of her clients her employment at Mega. According to CFA Institute Standards of Professional Conduct, have Anderson and Ford violated Standard IV: Duties to Employers? A) Anderson violated this Standard, but Ford has not. B) Both Anderson and Ford have violated this Standard. C) Ford violated this Standard, but Anderson has not. D) Neither Anderson nor Ford violated this Standard.
If forced to answer, i pick…not that i feel 100% confident in this answer but… C… can you post the correct answer and if its a CFAI or schweser question and where from so we can begin the debate?
I"ll say “C”. Ford has violated, I believe, but I dont think Anderson has as long as by “an independent investment advisor” he was the owner of the business.
strikershank Wrote: ------------------------------------------------------- > If forced to answer, i pick…not that i feel > 100% confident in this answer but… > > C… > > > can you post the correct answer and if its a CFAI > or schweser question and where from so we can > begin the debate? Good job, it’s C. It’s a QBank Question. Didn’t Ford engage in independent practice ? Which does NOT require consent from client (when we discussed this issue we agreed that Extra compensation --> Consent from all parties, Independent Practice --> Consent from employer only) …
I believe you need both, but I haven’t review Ethics yet, regardless if he got his clients permission but it wasn’t required, he is still in compliance, correct?
you need to disclose the arrangement with current clients. What we discussed in a previous thread was discloser to potential clients (which was unreasonable). In this case Ford is doing it on her own time and being compensated elsewhere so her independent clients must be made aware of this.
Actually the text does not differentiate between existing and potential clients. It says “all parties” You can review the actual text here: http://www.analystforum.com/phorums/read.php?13,674967
B
all parties doesn’t include potential clients - that would mean you would need to inform the entire world of your arrangements since eveyrone in the world represents a potential client. all parties would be clients and your employer - people you have a monetary arrangement on.
Actually, I wanted to have a part-time job at the local Burger joint and my employer made me take out a Wall Street Journal page to notify all parties of my intention and if anyone had issues to contact us, needless to say 1 person JoeyD had an issue and I didnt get to flip burgers, now I’m stuck trying to get a charter :(. In reality, mo34 the parties that you should be concerned about are Your CLIENTs, Your EMPLOYER, then YOURSELF in that order. Not perspective Clients, you Actual clients.
strikershank Wrote: ------------------------------------------------------- > all parties doesn’t include potential clients - > that would mean you would need to inform the > entire world of your arrangements since eveyrone > in the world represents a potential client. > > all parties would be clients and your employer - > people you have a monetary arrangement on. These are the facts: Getting consent from all parties is only required when getting extra compensation ( Employer and client paying the extra compensation - Thank you Big Willy for your clarification). Consent from employer only, when engaging in independent practice. Now applying these two facts to the question I believe Anderson DID NOT need to get consent from his client … but no harm done ( he’s an independent) But Ford did not violate either since she’s starting an independent practice in competition with her employer and she got his consent. My question is, why did Ford need consent from her client ? (Based on the written facts and not personal opinions please)
Mo34 - you keep quoting duy to employers and do so correctly. BUT you shoudl go over to the section Duty to Clients (CFAI text starting at page 50). you’ll see on page 51 that: “members must disclose all actual and potential conflicts of interest so that clients can evaluate those conflicts” also: “disclose compensation arrangements…members should make thier clients aware of all forms of manager compensation”
The question said " have Anderson and Ford violated Standard IV: Duties to Employers? "
He needs consent regardless from his Clients and Employer. Since he had an independent practice he was his own employer and thus didnt’ need his own permission. If you get extra compensation or have your own independent practice outside of your current job, you better have both your current Employer and your Current Clients permission or else you are in violation. Thus, Anderson DID need to get consent form his clients technically b/c he was in theory leaving his practice for a Firm, but keeping his clients to himself. Ford DID VIOLATE b/c she stated an independent practice w/o her clients knowledge and permission. Also, I dont know how far up the food chain you need to go with getting permission, I know at my place I have to go to the top. And I beleive our Ethics are based of CFAI’s Code of Ethics…
In response to the “Duties to Employers”, YES as per my discussion above. I don’t think a direct supervisor is high enough…
yes, it says standard IV but members must place the interest of clients ahead of employers so i blieve the duty to clients stands in this case even though the question specifically asks in relation to standard IV. standard IV even states: “members must always place the interests of clients above the interests of their employer”
Bigwilly - i think in real life you’re correct, i don’t see anywhere in the CFAI where it states how high you have to go for permission or to inform…
This has been a wonderful discussion…now whats on teh tube tongith?
strikershank Wrote: ------------------------------------------------------- > yes, it says standard IV but members must place > the interest of clients ahead of employers so i > blieve the duty to clients stands in this case > even though the question specifically asks in > relation to standard IV. > standard IV even states: > “members must always place the interests of > clients above the interests of their employer” In answering Ethics questions I try to follow exactly what the question says (in this case in regard to duty to employer, no mention to duty to client). With all due respect to real life experience, I am trying to get the answer the CFAI is looking for. I undertand that it’s easy to be more conservative and to select whatever answer provides more disclosure and focus on client interest, but that does always not guarantee getting the points for the question.