Practice Assessment - Ethics - Carlyle

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pmond

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Question 6 – Financial advisor Robinson asks his friend Carlyle to meet with potential clients he wants to impress. ”Robinson introduces Carlyle to one of his existing clients. Carlyle reviews with the client a recent conversation she had with the Paladin CFO regarding new growth opportunities, which she plans to include in her next research report.”
Was there a violation?
The answer says that Carlyle “has not violated the standards as she has only discussed the research process and did not disclose her most current research”
But she talked about what will be in her next research report?! Information that she received from the CFO herself. How is this not a violation?
 
I would assume that the information is not material for it to be a violation. But you’re right, this is very hazy.
 
Maybe you’re right, but it’s really hard to make that argument when an analyst is sharing information that she got from the CFO regarding new growth opportunities. Maybe because we assume that the client can’t buy individual stocks anyways so its not like he’s going to act on it? I don’t know. Really weird answer here.
Maybe because there’s no indication of whether the opportunities are good or bad?
 
I thought it was a very poor question.
As well, I don’t really understand the rationale really for Robinson’s violation here:
“When Robinson asked Carlyle to meet with several potential new clients to discuss her most current thoughts about the companies under her coverage he has committed a violation of Standard III(B) Fair Dealing. Members and Candidates must make every effort to treat all individual and institutional clients in a fair and impartial manner.”
Really? Would he have to invite ALL his clients and potential clients (how do you even quantify all potential clients) to this meeting? Seems a bit over the top.
 
I was scratching my head with this as well– how could it not be a violation? I guess maybe if she was planning to put it in her report, it wouldn’t be material non public (she couldn’t use it if it were). However, then she would be disadvantaging some clients (in my mind) by sharing report details in a selective manner prior to release. I’m sure the exam will have more clarity.
 
tikersu,
I think you are right looking at it from the Intergrity of Financial Market perspective, and, the puzzle comes together.
In fact the two standards that I would look at except the one above are:
>Fair Dealing, but applies to Recommendations and Actions
>Communication with Client and PClients, again strictly linked to Recom. and Action
They are the three of them discussing Growth Prospects, there is no Recom. neither Action. The Gr. Pr. will be part of a Recom. so they must be treated as a simple information (=>Integrity of FM).
And what is the value of a discussion about prospective growth opportunities? It is merely discussing about different possible scenarios inspired by the CFO.
A discussion about prospective growth opportunities is not material.
I don’t know if it was in purpose but its very tricky and borderline, maybe they just were trying to say an everyday chit chat on the company….
 
Guys, the trick is that’s an existing client Carlyle is talking to. Question asks about potential clients, so the CFO conversation is irrelevant. It’s only asking about the meeting after (the one with the potential clients). And there was nothing wrong there.
This vignette is pretty dumb imho, don’t even get me started on the stock purchase suitability from earlier on.
 
^wow. Didn’t even catch that. Well, there it is. Good work wecfanow. Need to try not to miss words like that.
 
lol so not only the question is misleading but the answer too.
 
HAHAHAHAHAAHAH
PPPPPPPPPRRRRRRRRFFFFFFFFFF…..
The smoky puzzle.
If someone is willing to tell me if the smoky puzzle would handle the question including the clients?
My ethics are at stake.
My G*d, Thanks Guys for this one,
 
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