- CFA Exams
- CFA Level I Exam
- Topic 10. Ethical and Professional Standards
- Learning Module 3. Guidance for Standards I-VII
- Subject 18. Standard VI (A) Disclosure of Conflicts
CFA Practice Question
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.
Correct Answer: I, II and III
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 |