this is crazy
Questions on the exam are more straighforward. Pepp, stop inventing questions:) Just because the described case in the textbook indicated that answer I don’t think is making it the right one among the other alternatives:)
Map1, Are you saying that given that scenario, I am better equipped to say which one the violations are than the standards? hehe. Making up questions is a good exercise, if you are successful at making it up, rest assured you are probably good at solving it too. IMHO.
The question is good only if it allowed for other violations to be considered, or it asked which one is more severe (although that can get interesting too), but the way it was written is clearly wrong.
pepp Wrote: ------------------------------------------------------- > 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. Well I don’t think this one is particularly hard. Just have to know your ethics, which I am no expert of, but I just remember from reading the texts how this situation is supposed to be treated. It was a long read though. Ah crap NM, the answer is A??? BOOOOOO!
I am saying that the interest and benefit of the client comes before the interest and benefit of the analyst and of the company that employed the analyst (that’s the loyalty). Before deciding whether to take the challenge of getting higher returns (hence her bonus), the analyst has to be concerned with the interest of his/her pension contributors. The company might very well tell analysts that they get whatever bonus for higher returns, he/she decides if it is in the interest of the contributors to the pension fund to enter into the challenge. She might as well decide not to, hence no need to inform the contributors.
“Oh, and BTW dear pension funds contributors, this letter is to let you know that my employer is paying me a bonus if I take more risk in your portfolio, but you know what? I am such a good girl and I am that concerned with your well being and security of your pensions, that I will not enter the challenge!” :))
On the other hand, they’ll think this portfoliio manager is so naiive, lets get the heck out of this fund altogether! Does she need to report compensation she gets from her employer anyway? That’s the basis of her salary, why should clients know bout that?
Well, back in the day when properitary mutual funds paid out more, that was an issue, and mum was the word 
Question’s like these do nothing to improve the ethical awareness of prospective charterholders. I mean if you’re faced with a situation like this in real life you’re going to know its downright wrong for a variety of reasons. Are we supposed to sit down and analyze which standard is being violated the most? Because that’s stupid.
The reference about the accumulation stage and long-term investment time horizon doesn’t justify if the analyst can just go ahead and change the risk profile of the portfolio. Since they are still in accumulation phase and because of the long-term nature of the investment, non-disclosure of investment basis seems to be less severe than not disclosing the actual motivation behind this change; which is additional compensation from the employer.