Sample Exam # 3, Ethics

Why do we need to disclose using athletic facilities to employer ? Is there any potential conflict of interest ? no. He works in brokerage firm and as a member of School’s Investment Committee participate in monitoring and evaluating of asset managers… Is it material ? no

Don’t know the quesiton, Mabye the athletic facilities charges a membership fee??

Before the guy got the job (as a broker) he was a football referee for insignificant consideration and sat on a invest. committee (monitoring asset managers) for a gym membership. He dislosed this fact during interview to his future supervisor and/or have in CV (supervisor didn’t considered such perfomance will be in conflict with guy’s future job). The answer is for football he did not have to get permission in writing because it was token amount and non-financial affairs but for the committee – need to disclose in writing and obtain written consent from employer

peter – Just took this exam today as well and was pretty steamed after getting creamed on this question (and the ethics section in general). Unfortunately, I think their answer is correct under the C&S. Standard IV(B) focuses on whether the member is engaged in “services that might create a conflict of interest with their employer’s interest”. When that’s the case, the consent has to be in writing from all parties. I guess the reasoning here is that even though the supervisor agreed the services weren’t actually in conflict, they certainly could be seen as potentially in conflict. Therefore the consent (from both parties) needs to be in writing no matter what the supervisor said orally. Also note that the amount of compensation doesn’t seem to be relevant. Oh well.

ok agreed regarding amount of consideration - in order to avoid subjectivity in evaluation whether compensation is significant or not - We always need to get permission in writing if there is any additional compenstaion to be recieved … but Is the source of income important here…we could get additional compensation from nursing (no conflict) or from financial consulting (which could be in conflict with current job)??? It seems that CFA logic is if it’s financial affair -please disclose and get consent, but if it’s non-financial -no need to get permission ?

I think that’s the logic – the nature of the activities seems to be the key, not the amount of compensation. The only wrinkle I could remember was in situations where you’re doing something that couldn’t possibly compete with your employer but that takes lots of time. In the handbook the example they give is a guy who is mayor of his town and gets paid for it. That’s a Standard IV(A) issue (denying employer the benefit of your skills, etc) but even there, they say all you need to do is discuss it and come to some sort of understanding. Written consent not needed.