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Basic Question 3 of 8
Simpson is a financial analyst with Flanders Brokerage Company. She is preparing a purchase recommendation on Burns Corporation. Which of the following situations would represent a conflict of interest for Simpson and therefore have to be disclosed?
II. Flanders holds for its own account a substantial common stock interest in Burns Corporation.
III. Simpson has material beneficial ownership of Burns Corporation through a family trust.
IV. Simpson's brother-in-law is a supplier to Burns Corporation.
I. Simpson is on retainer as a consultant to Burns Corporation.
II. Flanders holds for its own account a substantial common stock interest in Burns Corporation.
III. Simpson has material beneficial ownership of Burns Corporation through a family trust.
IV. Simpson's brother-in-law is a supplier to Burns Corporation.
User Contributed Comments 12
| User | Comment |
|---|---|
| danlan | Brother-in-law does not count as he is not considered as a DIRECT family member. |
| TheProfet | I think what is key in distinguishing 'IV' from the others is that Simpson has no beneficial or pecuniary interest in his brother-in-law's business (not stated in the fact pattern). Therefore, it need not be disclosed. As a practical matter, it would be suggested that Flanders establish internal disclosure policies that requires information like this to disclosed in order for such circumstances to be evaluated by a Compliance officer of the Comapny. |
| julescruis | Anyone noticed the joke? Simpson, Flanders and Burns. Very nice Analystnotes, hope there´s more... |
| Challs | look at his post...supplier...can he seriously have material information about his company in his current capacity? Yes, but let's be real here... |
| dblueroom | Is brother-in-law an immediate family member? Interest is one consideration, while another consideration is whether the person has influence on your objectivity, which is more a concern of Professional conduct I(B), not here. |
| Tommytang | what does it mean "Simpson is on a retainer..."? |
| makisupa43 | D'oh! |
| johntan1979 | As stated in the Standard, only these conflicts need to be disclosed: - Material ownership in the member's firm's investment account; - Market-making activities; - Corporate finance relationships; - Directorships Supplier, janitor, coffee-maker... these relationships are not of conflict of interest. |
| johntan1979 | Keywords: ALL matters that reasonably could be expected to impair the members' ability to make unbiased and objective recommendations. |
| marianne1 | retainer as consultant is too |
| walterli | Mr. Burn will take over everything |
| jhollar | Simpson would never work for Flanders Brokerage Company. Therefore this question is hogwash |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity
recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct
identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards
CFA® 2024 Level I Curriculum, Volume 6, Module 3.