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Basic Question 1 of 3
Alan Johnson, a CFA member, is a portfolio manager with an investment firm based in New York. One of his firm's clients told Johnson that she would compensate him beyond that provided by his firm based on the capital appreciation of the portfolio each year.
B. Johnson should get written permission from his employer before accepting the compensation arrangement.
C. Johnson should turn down the additional compensation because it would create undue pressure on him to achieve strong short-term performance results.
A. Johnson should turn down the additional compensation because it would result in conflicts of interests with other client accounts.
B. Johnson should get written permission from his employer before accepting the compensation arrangement.
C. Johnson should turn down the additional compensation because it would create undue pressure on him to achieve strong short-term performance results.
User Contributed Comments 15
| User | Comment |
|---|---|
| kalps | I think he should inform the employer before accepting the compensation arrangement |
| robkaz | I agree. He needs his employer's permission before accepting the offer. |
| jminard | what's the difference between if and before?? I think you guys are too .... |
| Nancie | "if" could mean "after". I think the correct answer is not very accurate but is obviously the best choice. |
| 0is4eva | The CFA program curriculum states, p. 69, in the explanatory addendum, "Standard IV(B) requires members and candidates to obtain permission from their employer BEFORE accepting compensation or other benefits from third parties for services rendered." |
| dlo1 | Alan should not simply inform his employer, but rather obtain "permission". Hence, that permission must be granted by the employer. The employer would want to ensure that this client receives no special consideration, which may be in conflict with other client accounts. |
| ashok1959 | why A is not correct. |
| thekapila | A is not correct becoause employer wil make sure that these arrangements wont affect other clients performance. |
| bobert | Very good point thekapila. |
| MattyBo | if employer permits such an arrangement, even if conflict of interest, then no violation. |
| AUAU | By the way, what does "employer" means????? Is it just your immediate supervisor or department head??? |
| judylyh | why isn't independence and objectivity related to this ie. do not accept? |
| gill15 | judy.. This gift is from a client so in these cases more extravagant gifts are allowed because they dont affect objectivity as much. Supervisor needs to keep a watch that the employee is not giving additional IPO offers or something to that individual though |
| raffrobb | I would like to dig deeper on why A is not correct. I like thekapila's answer but really need to unpack it more... |
| Yarrstar | What if it is impossible to get permission before? For example, after the dinner it was told that the glass of wine was very expensive. This standard does not tell anything, does it? |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
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.