Anyone find these 3 Standards too similar? VI (A) Disclosure of Conflicts VI © Referral Fees IV (B) Additional Compensation Arrangements If one fails to disclose additional compensation such as a referral fee, which standards would be violated? Let me make up an example, if John, CFA, refers a client to an investment bank, and the investment bank pays $200 for every client John referred. John did not disclose this relationship to the client, which standards did John violated??
It is common to have several standards violated at the same time. In this case, I’d say John has problem with VI© referral fees and VI(a)Disclosure of Conflicts. Not IV since it applies for relationship with employers, unless the arrangement is one John works out with the investment bank himself, not between his employer and the investment bank.
My understanding is that additional compensation is not necessarily from employer, it can be from client as well. Correct me if I am wrong.
We are talking in the context of standard IV Duties to employers, more specifically IVB: “Must not accept gift, benefits, compensations or consideration that competes with, ormight reasonably be expected to create a conflict of interest with their employers’ interest unless they obtain written consent from all parties involved.” In this case, I don’t think he violates IV(A), unless (as I wrote earlier) this is a deal he freelances on his own (not a deal his employers arrange). One can argue how much he violates standard III Duties to Clients. IIIA, but it normally applies when he acts on behalf of the clients.