CFA Practice Question
Joshua Matlin is in charge of research for Mountain View Research. He has a brokerage account with Mariner Brokerage Services. He has disclosed this information to his employer as per firm policy. Over the years, Joshua has become friendly with the senior management at Mariner. In exchange for free personal trades, he sends them one of his research reports once every quarter.
A. Joshua has not violated any standard since he has not accepted any monetary compensation for the report and he has not traded ahead of his clients in the securities mentioned in the report.
B. Joshua has violated Standard III (A) - Loyalty, Prudence, and Care.
C. Joshua has violated Standard IV (B) - Additional Compensation Arrangements by not disclosing this arrangement to his employer.
Explanation: Joshua has violated Standard IV (B) -Additional Compensation Arrangements by not disclosing the arrangement to his employer. He may also have violated Standard III (B) - Fair Dealing by releasing the report to the broker before releasing it to his clients. He has also violated Standard I (D) - Misconduct, by sending the report, which is the employer's property (and has the highest value when its confidentiality is protected), to the broker.
User Contributed Comments 5
| User | Comment |
|---|---|
| copus | Free personal trades are a form of additional compensation. |
| cong | Tricky question. C seems to be the best answer overall although B might be correct if you think about loyalty to one's own employer. |
| iambroke | No cong: when they say loyalty prudence and care....they mean it in reference to clients |
| u0302638 | Hi Cong, B is not correct as standard III A is referring to loyalty to Client, not employer. |
| ashish100 | No cong. B is not correct because that is in reference to clients. :] |