CFA Practice Question

CFA Practice Question

Serena Zaltz is a portfolio manager at Katalina Investments, a small boutique in Connecticut. She currently manages 3 client accounts, one of which belongs to John Hersham. John recently told Serena that if his portfolio beat the S&P500 by 75 basis points over the next 3 months, he would give 10 basis points to her as a "superior performance reward." Serena told him this was unnecessary but John insisted that such an arrangement be made on a handshake. Serena subsequently spoke to her supervisor, Helena, about it and Helena did not object to the arrangement.

Then, Serena has:
A. has violated Standard I (B) - Independence and Objectivity.
B. has violated Standard IV (B) - Additional Compensation Arrangements.
C. not violated any code of conduct.
Explanation: While Serena may have informed her employer orally about her additional compensation arrangement, Standard IV (B) requires written notification to the employer and this includes any form of communication that can be documented. Such written disclosures act as paper trails of all such arrangements and act as a deterrent to such arrangements except in the more compelling cases.

User Contributed Comments 8

User Comment
robkaz But the question does not say Serena accepted the offer! If she has not, she has not violated the standard yet.
sireklove I agree with the previous comment, plus, she did diclose the proposed arrangement so B can not be correct.
KD101 Handshake Agreement is binding (though it is not 100% clear if she shaked her hands too) so may "B" is correct - though I still think "A" is correct
stefdunk she still needs to inform her superior in writing
dimanyc come on guys, it clearly says that there was a "hand-shake agreement". Don't need to make it more difficult than it is.
thekapila only point is wriiten consent..
Mikehuynh Consent must be written
moneyguy If the handshake was intentional with the left foot slightly ahead of the right, AND she said "pretty, pretty please." She would still be in violation.
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