Ethics - Indepedence & objectivity - accepting gifts

[hei.so]

I’m confused by this standard. Depending on the situation, it always seems to be a different answer everytime.

1. Cannot accept gifts – must pay for all travel and hospitality expenses
2. May accept gifts as long as they are not lavish eg. no chartered flights
3. May accept lavish gifts as long as it is disclosed in the analyst’s report.

So which one is right? I’ve been doing mocks and all these situations have come up and I don’t know for sure which one to pick.
I’ll try to post some examples later if I can find them.

 

[AndrewUNH]

A lot of this depends on if it’s a client, or a broker, or a company you’re researching. I think for your #1 that may be referring to a company you’re researching where you really can’t be influenced by this stuff.
#2 you can accept gifts as long as not lavish FROM CLIENTS (or maybe brokers)
#3 as long as you get your employer’s consent, you can accept lavish gifts from CLIENTS
post any examples you find.

 

[hei.so]

Both are from Schweser mocks:
Roger Smith, CFA, has been invited to join a group of analysts in touring the riverboats of River Casino Corp. For the tour, River Casino has arrange chartered flights from casino to casino since commercial flight schedules are inconvenient and not practical for the group’s time schedule. River Casino has also arranged to pay the hotel bill for the three nighs of the tour. The trip is purely business. According to CFAI Standards and Professional conduct, Smith:

1. May accept the arrangements as they are.
2. may accept the flight but must pay his own hotel bill.
3. must offer to pay for his share of the airfare and his own hotel bill.

Peter Taylor, a CFA Charterholder and an analyst for a large investment firm, has been offered an all-expense-paid trip by Sweet Pineapple Co. to visit the firm’s processing plants in Maui, Oahu, and Kauai. Taylor, a food industry analyst, has been following Sweet’s stock for several years and recently issued a “buy” recommendation on the stock. Taylor believes a review of the firm’s processing facilities during its busy January harvest period would be an excellent opportunity for him to assess the firm’s productive capacity and learn even more about their business. The Standard concerning independence and objectivity recommends that Taylor:

1. pay for his air travel and hotel expenses.
2. obtain written permission from his employer before he accepts this offer.
3. pay for all his travel expenses, including the cost of meals and incidental items.

I answered Smith’s correctly because it didn’t seem to lavish. I answered 2 for Taylor because I thought that the employer can then determine if Taylor’s objectivity is compromised.

 

[saborio]

Firstly remeber that it is good for the analyst to visit the companies.
The first one is inconvenient to reach, therefore it is suitable that the company pays/charters a flight etc. If the company does not pay, because the times are inconvenient there is a change that he will not go.
In the second question, his independence and objectivity is much more likely to be compromised if the company pays and therefore it is suitable that he pays for his expenses on the fact finding mission.

 

[50centperDollar]

I agree that Smith should not have to pay for the flights, but why does the company pay the hotel bill?
As for the second one: The Standard concerning independence does not require the analyst to ask for written permission (that is “duties to the employer”). I know, that’s a bit nit-picky but hey, we are talking about CFA-exam questions… ;-)