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Subject 13. Standard IV (B) Additional Compensation Arrangements PDF Download


B. Additional Compensation Arrangements.

Members and Candidates must not accept gifts, benefits, compensation, or consideration that competes with, or might reasonably be expected to create a conflict of interest with, their employer's interests unless they obtain written consent from all parties involved.

Outside compensation/benefits may affect loyalties and objectivity and create potential conflicts of interest. These include direct compensations from clients and indirect compensations or other benefits from third parties.

Note: Accepting gifts is allowed, but you must inform your employer in writing before accepting.

Procedures for compliance

Members should make an immediate written report to their employer specifying any compensation they receive or propose to receive for services in addition to compensation or benefits received from their primary employer. Disclosure in writing means any form of communication that can be documented (e.g., email). This written report should state the terms of any oral or written agreement under which a member will receive additional compensation. Terms include the following:

  • Nature of the compensation.
  • Amount of compensation.
  • Duration of the agreement.

Example 1

In an attempt to increase portfolio performance, a firm's client offers the portfolio manager an incentive, such as a free vacation. A conflict of interest exists in this case and the portfolio manager must inform the firm before accepting the arrangement.

Example 2

One of your firm's clients manages a ski resort in Colorado. She has told you that as long as you are managing her assets, you are entitled to complimentary lift tickets at the resort. To be in compliance with this standard, you must report this in writing to your employer. The employer will want to ensure that this client receives no special consideration as a result of the arrangement.

Example 3

Steve sits on the board of directors of ABC Inc. As a result, he obtains unlimited membership in ABC Inc.'s services. Steve does not disclose this relationship to his employer, because he does not receive monetary compensation. Steve has violated this standard by not disclosing the benefits he receives to his employer.

User Contributed Comments 10

User Comment
migri05 and if the compensation doensnt exceed 100$, sould the emplyee always inform the emplyer?
yly13 although it states $100 as the limit for modest gratuities, it doesn't have to have even have monetary value as long it could be PERCEIVED as possibly affecting one's objectivity.
Ioannis Above 100$ you are not supposed to accept it to begin with.
rethan Loannins where does it say that one cannot accept any gift items above $ 100? Could you pls clarify?
investime $100- IB. Independance...I think this was actually referring to the sell side analyst type jobs. So the $100 is not really a standard as it pertains to direct clients gifts as it is a form of compensation for actual duties received as opposed to being courted for a favorable report/recommendation. However this standard is saying that if you are offered additional compensation it needs to be detailed to your employer.
tschorsch I assume that ABC must be giving some sort of financial services. If ABC is in some other type of service business and has no other connection to Steve's employer, I would assume that he would not have to get permission.
kforcfa Gifts from clients can be distinguished from gifts given by other parties seeking to influence a member to the detriment of clients. Gifts from clients are deemed less likely to impair a member's independence than gifts from other parties seeking to influence the member's outlook. Members and candidates must disclose to their employers any such benefits from clients.
vyasrn From this example it seems that you can take any compensation after giving in writting to your it so??
nayagan $100 is also the standard for Series 7
Kaloyan In what form (written, oral?) will be the consent/disapproval of your employer regarding your written report on compensations received/to be received?
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