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11. Phillip Cochran, a CFA charterholder, is a portfolio analyst with Frazier Trust, and manages the portfolio of Dennis Quad. Although Cochran receives a salary from his employer, Quad tells him that “any year my portfolio exceeds a rate of return of 16% before tax; you can fly to Paris at my expense and use my apartment for a week”. Cochran fails to inform his employer of the arrangement and his vacation in Paris the following year. Cochran most likely violated the CFA Institute Standards of Professional Conduct related to:
Additional Compensation Arrangement.
Suitability.
Independence and Objectivity.
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12. Selma Hyek, a senior executive of Avery Capital, issues a performance report for the accounts that showed capital appreciation for the years 1990 to 2006. Avery Capital claims compliance with GIPS standards. Returns are not calculated in accordance with the GIPS standards, because the composites are not asset-weighted. Hyek most likely violates the CFA Institute Standards of Professional Conduct relating to:
Performance Presentation.
Integrity of Capital Markets.
Record Retention.
13. Steve Miller is enrolled as a candidate in the CFA Program. He works as an assistant manager in Trust Investment Bank. He enjoys drinking liquor during his lunch break. Miller‟s colleagues have noticed that he is visibly intoxicated after the lunch break and is not in a position to make rational investment decisions. Miller most likely violates the Standard of:
Misconduct.
Knowledge of the Law.
Disclosure of Conflicts.
14. Steve Tylor, a CFA candidate and a technology analyst with Rock Brokers, is invited by SuperTech to participate in a technology conference at SuperTech‟s expense. SuperTech has also invited a few other analysts from different companies to the same conference. It arranges and pays for Tylor‟s airfare and accommodation for two nights. The trip is strictly for business purposes and Tylor is not offered any lavish hospitality by SuperTech. Tylor informs his employer of the arrangement and is given permission to attend the conference. By accepting this invitation, has Tylor violated the CFA Institute Standards of Professional Conduct?
No.
Yes, because it creates a conflict of interest.
Yes, because it compromises Tylor‟s independence and objectivity.
15. Franz Beckenbaur, CFA, is a trader for Lee Inc., an investment and brokerage firm. He receives compensation for referrals from the firm‟s portfolio and financial planning division. He usually refers clients from his previous employer and does not have a non-compete arrangement with them. Beckenbaur uses his own personal material to contact them and informs them duly of the referral arrangement. Has Beckenbaur violated any Standard?
No, because he discloses to his former clients the referral arrangement.
Yes, because he has a duty of loyalty to his clients.
Yes, because of a breach of loyalty to his former employer
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