- CFA Exams
- CFA Level I Exam
- Topic 10. Ethical and Professional Standards
- Learning Module 71. Guidance for Standards I-VII
- Subject 12. Standard IV (A) Loyalty
CFA Practice Question
There are 356 practice questions for this topic.
CFA Practice Question
You are an industry analyst for an investment firm. In your spare time, you form an investment club with former college friends. You agree to manage a portfolio of commingled funds for a fee and a performance incentive and intend to use information gained at your firm to manage the portfolio. You inform your supervisor of this venture in writing and he approves.
A. You have not violated the Standard because you informed your supervisor in writing and your supervisor approved.
B. You have violated the Standard because it precludes all activities competing with your employer.
C. You have violated the Standard because you intend to use information obtained at work.
User Contributed Comments 27
|turtle||I would say, that standard is not violated if you have informed in writting the employer and get his written approval. But also you have to inform clients (this case friends) that you're employed with the XXX company, that performs those services for such and such fees.|
|gambary||i think the key point is that he used information obtained through his employer for personal gain. i believe he would be fine if he got the approval and didn't use information he gets from his employer at his personal work.|
|Munch||Standard IV(A) covers self dealing, that is taking the employer's property or information. By using Firm research you are self dealing in breach of the standard. If you did not use firm information and got written consent from both your clients and your firm then you could compete.|
|alism||also see that he intends to use information gained at the firm for managing the portfolio|
|yanpz||I think client is the major element that made him violate Standards...|
|robbe1||Standard VI(A) states "unless they obtain written consent form BOTH their employer AND the entities for whom they undertake independet practice".|
|riley||Getting consent from clients are not required from the new standard (11th edition).|
|shanerbaner||Taking an employers property or information that it has allowed you to take does not violate any proper ethical standard because it is the employers property and it can do with it what it likes.|
|wollogo||Technically I agree with the answer but if you think about how is it possible for an analyst to seperate their knowledge from what they have learnt at work.|
|blkmoon||Exactly, because of the nature of his employment naturally he will be exposed to information gained from work and his employer would have foreseen this when giving the permission... at least they should have.|
|mir83||Whats with approval issue?|
|DashingDude||I think it is OK to use experience but not the information|
|prachirp||very difficult to seggregate the two.|
|hlongoni||The key is "having material non-public information"|
|edseven||Are you saying that the employer cannot allow the employee use of the firm's information?
Doesn't informing of the outside business require to inform of the scope of the business?
Or are you saying that if the analyst reports on the ABC company for his employer he cannot invest the clubs money in ABC also?
|JakeZ||How can this be NOT allowed!?!?!?
This is same as taking on additional client!
I dont think there is a rule stating you have to let your client know who else is ur clients.
If your boss says ok, then its non of ur client's business unless you treat them unfairly or unequally.
|Skrills||if you have written agreement from boss it should be fine. how would your friends not no what you do for a living, especially when they trust you with managing their money. and how are you not suppposed to use info from work. oooohhhh, well i learned this tip at my job so therefore i can't use it? im gonna be pissed if bs questions like this keep me from passing!|
|agungdananjaya||I guess this question really testing about self judgment about posibility conflict of interest|
|gill15||Just make it simple. You can independently compete with your employer WITH consent but not use information from your workplace. By information they mean using there databases, systems etc...they dont mean the knowledge you gained from experience.|
|bbadger||Dumb question. Not sure about you, but every day as I leave my office, I intentionally forget everything I've learned that day. Makes the next day really difficult.|
|ankurwa10||It's not the best question. Because how can one assume that in the 'competing role' i 'intend to use' what i learnt in the other role.|
|jodz327||Remember INTENT that's what is not referred when the employee told his boss about the arrangement. The employee made it seem as if he would be doing his own work for the investment club in the written approval.|
|NickGerli||The question should have been more clear and state that you didn't inform your employee of the intention to use information from work.
Because as far as I can glean from other sections, you are allowed to use information from your job so long as the employer signs off on it.
One issue I have is the inconsistency in assumption making in some of these questions. Sometimes you're expected to make an assumption, other times it's heavily based on what's explicitly said. But I guess that's ethics in a nutshell, right?
|Inaganti6||This question is very direct. Read it again.
"YOU INTEND TO USE THE INFORMATION GAINED AT YOUR FIRM".
That's a clear violation.
YOU CAN COMPETE WITH YOUR EMPLOYER BY OFFERING SERVICES WHILE EMPLOYED IF THE EMPLOYER AGREES, BUT IN NO CASE SHOULD YOU TAKE DATA/INFO ATTAINED DURING EMPLOYMENT. IT'S THE PROPERTY OF THE FIRM.
|Bedee||Hello there, can anyone taking part in this blog telling me the date when this took place.|
|karstenth||I think B is incorrect. Pursuant to III. B - Fair Dealing, the employee just have to guarantee that there is ample opportunity for the customers to act on. Thus, he or she should be allowed to execute the trade.|