Samantha Dyson, a portfolio manager for Thomas Investment Counsel, Inc., specializes in managing defined-benefit pension plan accounts, all of which are in the accumulative phase and have long-term investment objectives. A year ago, Dyson’s employer, in an attempt to motivate and retain key investment professionals, introduced a bonus compensation system that rewards portfolio managers on the basis of quarterly performance relative to their peers and certain benchmark indexes. Dyson changes her investment strategy and purchases several high-beta stocks for client portfolios in an attempt to improve short-term performance. These purchases are seemingly contrary to the client investment policy statement. Now, an officer of Griffin Corporation, one of Dyson’s pension fund clients, asks why Griffin Corporation’s portfolio seems to be dominated by high-beta stocks of companies that often appear among the most actively traded issues. No change in objective or strategy has been recommended by Dyson during the year. A) Violation occurred under disclosure of conflicts B) Violation occurred under loyalty to clients C) violation occurred under suitability of investments for client D) violation occurred under reasonable and adequate basis for investment action
I would say C.
B
pepp Wrote: ------------------------------------------------------- > Samantha Dyson, a portfolio manager for Thomas > Investment > Counsel, Inc., specializes in managing > defined-benefit pension plan accounts, all > of which are in the accumulative phase and have > long-term investment objectives. > A year ago, Dyson’s employer, in an attempt to > motivate and retain key > investment professionals, introduced a bonus > compensation system that rewards > portfolio managers on the basis of quarterly > performance relative to their peers > and certain benchmark indexes. Dyson changes her > investment strategy and purchases > several high-beta stocks for client portfolios in > an attempt to improve > short-term performance. These purchases are > seemingly contrary to the client > investment policy statement. Now, an officer of > Griffin Corporation, one of > Dyson’s pension fund clients, asks why Griffin > Corporation’s portfolio seems to > be dominated by high-beta stocks of companies that > often appear among the > most actively traded issues. No change in > objective or strategy has been recommended > by Dyson during the year. > > A) Violation occurred under disclosure of > conflicts > B) Violation occurred under loyalty to clients > C) violation occurred under suitability of > investments for client > D) violation occurred under reasonable and > adequate basis for investment action C
C
agree with map1…C
besides the right answer I am also interested in knowing who finds this sort of question hard or relatively easy? if I see this sort of diffuclty on exam, i am gonna have a heart attack.
A ir D are out. Either B or C, I will go with C You’ll see that A LOT of ethics questions are like this one, where you can trim 2 off right out of the gate, but then boil down to two that ostensibly look alike
B applies, but I think there is a stronger case for C based on how the q was worded.
Hmmm…actually, I can almost bet this would be a B, loyalty prudence and care:) Be loyal to your beneficiaries (the pension fund beneficiaries) and act in their best interest.
pepp- I think this question is moderate difficulty because more than one answer could potentially apply. I find the hardest ethics q’s to be when multiple standards are offered within each option and you have to figure out the right combo of standards violated.
My first guess was B. Dyson works for the beneficiaries, not her employer.
The beneficiaries, not herself and her bonus:)
what is the answer???
No one has got it right. no wonder, I thought this was one of the hardest ethics question. Answer is A Dyson violated Standard VI(A) by failing to inform her clients of the changes in her compensation arrangement with her employer that created a conflict of interest. Firms may pay employees on the basis of performance, but pressure by Thomas Investment Counsel to achieve short-term performance goals is in basic conflict with the objectives of Dyson’s accounts. – straight from standards handbook,
you crack me up:))
The question is not fair. There are clearly 3 violations (A, B, and C), so why only choose A?
No where in the question it is mentioned that “there was no disclosure of the compensation”. But, unsuitability clearly glares out. I don’t know if this question is tough, or poorly written !!
Dreary, I agree with you. I am wondering if CFA institute will give such kind of problems. because the above problem choices were made up by me. While the solution is clearly provided by standards. so go figure – why standards doesnt’ say its also a violation of B and C. its just a big mess. ain’t it? Read pg 93 of standards if you dont believe me.
i would’ve picked C