CFAI Mock PM - Ethics: Carlyle

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Mattyj7183

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Question 6 on thie item set.
Can someone please tell me how Carlyle didn’t violate any standards by discussing with the advisor and a client about a conversation Carlyle had with a CEO about growth opportunities that she plans on including in her next report?
Seems pretty material-nonpublic to me, that is, until the report is published.
 
After re-reading it like 20 times I see the “gotcha” in the question, but it’s also really subjective as to when a meeting officially starts. Is a pre-meeting a different meeting altogether or is the same meeting just starting earlier…
I know this is splitting hairs, but they wrote the question…
 
Yeah this question is extremely sneaky. I am fairly certain she did violate the standards when she was meeting with the existing client but the question asks if she violated the standards during the meeting with the potential clients where she did not discuss the call she had with the CFO she only spoke about her research process.
 
I think get this now. In the explanation above, it assumes Paladins growth opportunity is already public information in a research report. So any more “new” growth opportunities should be assumed as public information, because the public already knows this company is full of growth opportunities.
 
this question is such bs,whats the point srsly
 
what about question 4, the inclusion of small cap mutual fund, i dont get that one, if its small cap a big growth stock def violates stuitability, no?
 
No violation there as you need to look at the portfolio as a whole rather than individual stocks.
 
Does “looking at the portfolio as a whole” apply to individuals?
Wouldn’t you violate suitability if an investor had a stable value objective and you’re taking small positions in small cap growth stocks because the portfolio still meets the stable value profile?
There’s too much subjectivity on this test. Make the point clear to see if we understand the concept…
 
Thank you guys for the highlight, I also fell for this question and was unable to reason through the rationale behind the non-violation, so now I no the question is asking about the conversation with potential clients and not existing client.
Thanks guys.
 
Yes, the discussion with the existing client violates the CFA code. However, the question asked us if a violation occured during the conversation between Carlyle and the Potential Clients and not the Existing Client.
 
But what’s the difference? she is disclosing a private conversation with a CEO, in my opinion does not matters if is a existing client or potential who is receiving the info
 
The question did not ask for violation in regards to the existing client, but rather based on the conversation with the potential clients, in which she clearly did not violate any standard.
Thats the point to take out.
 
You did not answer my question mate, what’s the difference between speak with potential or exisiting clients?
She is disclosing a private converesation
 
After reading and re-reading the question I truly think the answer is no violation because how the question is asked - nothing else. It’s asking if there a violation DURING the meeting with potential clients, not during the few minutes before the meeting when the MNP information was shared.
Still - a very stupid and poorly worded question.
 
No, it’s because the information for new growth opportunties is not material.
Companies always have new “growth opportunities, every single one of em. Senior Mgmt is not doing their job if they are not at least exploring “opportunties”
opportunties is the key word here. There is nothing set in stone, no concrete data. just opportunities.
 
gummybears20 wrote:
No, it’s because the information for new growth opportunties is not material.
Companies always have new “growth opportunities, every single one of em. Senior Mgmt is not doing their job if they are not at least exploring “opportunties”
opportunties is the key word here. There is nothing set in stone, no concrete data. just opportunities.
Click to expand...
Good point
 
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