CFA Practice Question

CFA Practice Question

Victor Lazquez is an analyst with Amro Investments and follows the optical instrument manufacturers. In this capacity, he has learnt a few trade secrets pertaining to a leading edge firm, Fibroptica. Recently, he was approached by Fibroptica's competitor, Lensmakers Inc., who offered him a 3 month project on the optical industry practices. Victor realizes that such a project could reveal Fibroptica's trade secrets indirectly. However, he decides he will be very careful and accepts Lensmakers' offer. If he does not inform his employer about this project, he will
A. have violated Standard VI (A) - Disclosure of Conflicts.
B. have violated Standard IV (A) - Loyalty.
C. have violated Standard IV (B) - Additional Compensation Arrangements.
Explanation: Victor's knowledge about the trade secrets have arisen in course of his employment with Amro. As such, he has an obligation to get written permission from Amro before he can accept any outside projects. Note that if such a project had been in direct competition with Amro's business, Victor would also have violated Standard IV (A) - Loyalty.

User Contributed Comments 6

User Comment
keithinny A must be true also, how can he not have a conflict here ?
nike had he owned any stocks of Fibroptica he would have violated VI(A).
Bedee However, the text doesn't reveal any compensation details, so why is it IV B?
harrybay What bothers me is that nowhere does it say Lazquez received any compensation. C was my first choice but I couldn't resolve myself to pick it since it's not written there was ANY compensation AT ALL.
bonsuet It's said "if he does not inform his employer about this project"...
Albireo To those who say the text doesn't reveal any compensation details, I think - don't take my word for it though! - that the word 'offered' refers to being provided or promised compensation.
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