Now taking ethics questions

I think you will see this “CFAI trick” on listing types of questions, like they could do one in corporate governance, where they are asking for an “Objective” and you get tricked if you select the distractor under the “Core Attributes”

So, are we not supposed to assume they comply with Soft Dollar Standards if it is not mentioned? Looks like my time should’ve been dedicated to learning esoteric formulas like Ibbotsen Chen.

You are right. You’d be given in the vignette whether the manager in question claims compliance. Remember, compliance with SD standards is optional for members or firms.

CFASniper Wrote: ------------------------------------------------------- > You are right. You’d be given in the vignette > whether the manager in question claims > compliance. > > Remember, compliance with SD standards is optional > for members or firms. Thanks

I am a research at analyst at a big bank and my incentive comp is determined roughly based 60% on my research accuracy and 40% on the investment banking revenues the companies i cover generate for my firm. This compensation policy is disclosed by the firm and applied equally across all research analysts. Is this is a violation of the ROS?

thems Wrote: ------------------------------------------------------- > I am a research at analyst at a big bank and my > incentive comp is determined roughly based 60% on > my research accuracy and 40% on the investment > banking revenues the companies i cover generate > for my firm. This compensation policy is disclosed > by the firm and applied equally across all > research analysts. > > Is this is a violation of the ROS? Yes. It would be permissible if it was based on general firm revenue as long as it is disclosed as the extent on which the analyst’s compensation is dependent upon.

Cannot be directly linked with investment banking revenues. That looks like a violation to me.

This applies for only a DIRECT link right? So analyst compensation is tied to accuracy and company profit. Most of a companies profit comes from IB. Still ok right?

But i think the issue is that its linked to the profits of the IB revenues generated from the company the analyst covers, not the firm overall.

yup, i think asif has nailed it. kh.asif Wrote: ------------------------------------------------------- > Cannot be directly linked with investment banking > revenues. That looks like a violation to me.

Thats not a direct link…

CFAI Ethics p171: “Although direct linking of analyst’s compensation with investment banking revenue is prohibited, firms should disclose the extent to which research analyst compensation in general is dependent upon the firm’s investment banking revenues.” I find this to be super vague. How do they define a “direct link”? Clearly some form of linking is acceptable, otherwise there would be nothing to disclose…

thems Wrote: ------------------------------------------------------- > I am a research at analyst at a big bank and my > incentive comp is determined roughly based 60% on > my research accuracy and 40% on the investment > banking revenues the companies i cover generate > for my firm. This compensation policy is disclosed > by the firm and applied equally across all > research analysts. > > Is this is a violation of the ROS? So what’s the answer to this, is this a direct link or not?