CFA Practice Question
Myrna Ashford has married Byron Gilford and has asked him to fill out a form listing his beneficial holdings so that she can submit it along with her holdings to her employer as required by the firm's annual disclosure rules. Myrna does not report the securities held by her grandmother - about which she advises her grandmother from time to time - on her disclosure form. Her grandmother has willed these securities to a charity. The charity is a portfolio client of the firm. Has Myrna violated Standard VI (A) - Disclosure of Conflicts?
A. Myrna has not violated Standard VI (A) by not listing the securities held by her grandmother.
B. Myrna has not violated Standard VI (A), as she is only required by law to disclose securities held by her or her husband.
C. Myrna has violated Standard VI (A) as she has not disclosed the securities owned by her grandmother (about which she sometimes provides advice) and/or her grandmother has willed her securities to a charity which is a client of the firm.
Explanation: Myrna has not violated Standard VI, as she is required to disclose beneficial interests. She clearly does not have a beneficial interest in these securities as they are willed to a charity. Even if the charity is a client of the firm, it may not be aware of this bequest and Myrna need not discuss this with her employer as her grandmother is entitled to confidentiality. If there is a conflict of interest, Myrna may need to revisit her relationship with her grandmother, whether to disclose them to her employer or stop advising her grandmother and direct her to a formal relationship with the firm.
User Contributed Comments 4
| User | Comment |
|---|---|
| Bibhu | There are two key points in answering this sort of questions. 1.Concept check ( e.g. conflicts of interests) 2.Violated code and standards no. Good question. |
| Bibhu | more important here is the "charity". Had it been something different, then answer would have been different. |
| thekapila | had it been that she is the beneficiary answer could been A |
| CalebMast | The connection back to firm, thus potential conflict, was charity as beneficiary of grandmother and client of firm. Without charity being client (Myrna as beneficiary, etc.), potential conflict less likely. Confidentiality of grandmother seems most important for scenario, other things equal. |