- CFA Exams
- CFA Level I Exam
- Study Session 1. Ethical and Professional Standards
- Reading 3. Guidance for Standards I-VII
- Subject 12. Standard IV (A) Loyalty
CFA Practice Question
There are 361 practice questions for this study session.
CFA Practice Question
Kevin Pol is an independent research analyst who identifies various opportunities for various companies in the market and receives a fee for doing so. He currently researches general equities and debts for PLU Brokerage House for a flat fee. He has recently identified a fantastic opportunity in the debt area. Kevin sells this opportunity to LOY Brokerage House for a fee. PLU is now upset with Kevin for not bringing this debt opportunity to them, and accuses him of violating the Code and Standards. Is this so?
A. This will depend on whether or not Kevin had a specific agreement with PLU to provide ALL research to them. If this is the case, Kevin has violated this standard. If no specific agreement is in place to provide all types of research to PLU, Kevin has NOT violated this standard.
B. Yes. Since Kevin was providing PLU with general equity research, he should bring all research to them first and only afterward offer it to other brokerage houses.
C. No, since Kevin was currently providing PLU general equity research rather than debt research, and because he is an independent analyst.
Explanation: Since Kevin is an independent analyst, his duty to the various parties that he provides research to will depend on the contracts that he has in place with them. If Kevin had a specific agreement with PLU to provide ALL research to them, then he must bring ALL research to them first. If Kevin had no specific agreement in place to provide all types of research to PLU, then Kevin will only need to bring them the research that he contracted to provide them with.
User Contributed Comments 7
|niti||finished at 3:37AM IST june 3rd.This was the last review session.Ready to rock..|
|prachirp||How did u do? Did u clear ?Kindly share your views please for prospective exam takers.|
|dblueroom||Level II is difficult, and you absolutely have to know your abc and accuracy is required to pass the exam. It is very different from Level I. If you want to pass, focus on FSA, EQUITY, and Corporate finance, and if your not an economist, work on those parity relations. Last year, portfolio mgmt had a wack last set question.|
|dblueroom||regarding to this question, I feel the arrangement is pretty clear that "He researches general equities and debts for PLU Brokerage House for a flat fee", and thus he has an responsibility to bring the debt opportunity to PLU.|
|sarathbs||I do agree with dblueroom. Kevin's current job is to research debt area for PLU, and he sold his best find on debt to a third party. There is a violation.|
|TarriqP||I agree with dblueroom. Even if it is not specifically stated in the contract that ALL research must go to PLU, surely there would be an ethical responsibility? I mean you can't accept a fee for researching debt and then not give them the research...|
|akirchner1||The answer is correct. It does not specifically state that there is a contract in place. See Nature of Employment under Standard IV(A).|