Ethics Disclosure Question

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jamespucyk

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Question 1)

John Jacobs is a portfolio manager with several high value clients. One of his client is Sam Snider who owns a luxury car dealership. After a year of good portfolio performance Sam Snider in gratitude (and after learning off-handedly that John likes a particular new car model his dealership sells) offers John Jacob a new hot luxury car model that has just been brought onto the lot at cost plus a small markup; a substantial savings for John. John can/should:

A) Accept the gift from Sam since there is no provision not to do so especially when you are dealing with minor gifts and Sam will be compensated for it.
B) Not accept the gift at all as it can potentially create a conflict of interest.
C) Accept the gift only after disclosing it to his employer.
D) Accept the gift only after disclosing it to his employer and his other clients.
E) Not accept the gift as it is a violation of the Code to do so.
 
Question 2)

George Weston is a successful investment advisor with Smith & Burns, who also serves on the board of directors for GCT Corp. The company has a write up in it's promotional/informational booklet that it distributes to clients listing George's directorship with GCT. GCT Corp offers George and the other Directors golf course membership to Three Oaks Golf Course. George must, upon accepting this membership:

A) Immediately disclose his acceptance of the membership to his clients only.
B) Immediately disclose his acceptance of the membership to his employer and his clients.
C) Immediately disclose his acceptance of the membership to his employer only.
D) Immediately disclose his acceptance of the membership to his employer and his clients and ensure a revision of the current promotional/informational booklet distributed to prospective clients.



Edited 1 time(s). Last edit at Saturday, May 6, 2006 at 02:27PM by jamespucyk.
 
hmm.. would say D.. But if D is incorrect then I choose B..
It seems like the rules for these questions vary between acceptable if disclosed to employer, clients, and potential clients in writing before accepting it.. OR.... that it represents a conflict of interest
 
I would say C to the first one...because the gift was post facto...it was not an incentive before hand that would sway his judgement...just need to be disclosed to his employer I think
 
1. C
2. D

BTW which question banks are you using. Most of the questions have 5 choices. This will take up more time than usual 1.5 mins.
 
1. C
2. D, but I don't think disclosure to clients is necessary unless a report is being prepared on GCT.
 
OK well Number 1 is C, most of you got that one, but 2 is also C. You can actually lump prospecitve client and clients together because they need to know the same information. The logic for C is that only the employer needs to know of the compensation because the employer has to know if there will be a conflict of interest. Clients on the otherhand need to know of the directorship and often with a directorship compensation is implied often in thses situations.
 
vir_vict Wrote:
-------------------------------------------------------
> 1. C
> 2. D
>
> BTW which question banks are you using. Most of
> the questions have 5 choices. This will take up
> more time than usual 1.5 mins.


Well I made up the first one after reading the section and the second one is based upon a similar question I saw with Schweser and I am not making them CFA standardized questions either.
 
I still think #1 is D. Because Jacobs might favor Snider going forward.
 
I think you only have to disclose it to clients if gifts are given by companies (because that might alter your judgment about that company).
 
CFAHouston Wrote:
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> I think you only have to disclose it to clients if
> gifts are given by companies (because that might
> alter your judgment about that company).


tht wd be applicable if your researching /making a recommendation about the company ..in this case he just sits on the board for which he probably recieves comp. ...he has to disclose to his employer because of the compensation ...even a "potential appearance " of a conflict should be disclosed .
 
hints Wrote:
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> I still think #1 is D. Because Jacobs might favor
> Snider going forward.


No disclosure of a gift from one client to another is required, only to the employer and the reason for that is so that the employer can monitor the candidate's/member's activities so that the employee does not give the employee preferential treatment (Standard 1B)
 
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