CFA Discussion Topic: A couple of CFA Ethics questions

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Author Topic: A couple of CFA Ethics questions
jmoss
@2019-08-16 13:12:48
I have a couple of questions on ethics:

a. If Person A who works in a different dept is making incorrect representations and Person B knows this. Person B informs his boss but he asks Person B to stay out of it. By continuing to work there, has Person B violated?

b. If someone else is doing something wrong, does Person B always have to report it? Even if person B is not directly involved in that company. For e.g. Person B works at an AMC and finds out that a major client is making incorrect claims about its own products. Does Person B need to report this to someone?

c. Person B finds out that a public company is committing fraud, Person B is not actively covering the company’s stock and has thus not recommended it to clients. Should Person B still report this to someone? Who?

d. If a company is GIPS compliant, can a client assume that all returns/ information presented is accurate/ free of errors? In mock exam 2 there was a confusing answer choice related to this.

e. How do you do due diligence on 3rd party reports? Do we have to verify and do our own research on top of 3rd party research to meet VA Diligence?

f. If an analyst does research and prepares a report and suggests that interest rates will go down. She shares the report with other investment committee members who disagree with her conclusion. If the question doesn’t clarify that other members have sound knowledge of the matter and have done adequate research, what should be the answer to: should the analyst put her name on the report? Should we assume that the other members are diligent?

g. Being pressurized to issue a false report is a violation of which standard?

h. Some standards are so close to each other in terms of content, how do you guys distinguish between them. I understand the differences when I am solving practice questions but in mock exams I get confused.

i. How do I change my username? :) I didn’t realize I used cfa in the username.
BillCobby
@2019-08-29 00:33:12
A. Yes, B has violated. The book does state that you must remove yourself from that position even if it may involve not working there anymore. This is on the largest reading and is under dissociation in the CFA book.

B. How is person B not related if he finds out that a major client is making false claims. Is this not involvement? Still though, he should report.

C. Yes, B should report. To supervisors and whomever else will depend on his company’s culture.

D. No, GIPS is a standard and just that. It does not prevent fraud or magically make companies start reporting fairly.

E. Yes, you have to also do your own research.

F. Yes, she can put her name down on the report. No, do not assume the other members are diligent.

G. Being pressured to issue a false report does not violate a standard, but if you issue that false report, you violate Standard IA as you should disassociate from the situation. Standard I (C) misrepresentation and probably a couple more. I did not memorize the standards.

H. Practice or re-read ethics.

I. Unfortunately, no idea how to change your name. You can always say it stands for Chick Fil A.