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Ethical and Professional Standards Q68

0. Preet Khadri, CFA, works for Eminent Capital as an investment advisor. She meets with a college classmate at a dinner who offers to pay Khadri a compensation for selling the stock of her company Zoratri Inc., to her clients. Khadri does not mention this arrangement to her clients or employer, and sells the shares of Zoratri to her clients where appropriate. Khadri has least likely violated the Standard related to:

  • Option : A
  • Explanation : Khadri is in violation of Standard VI(A) Conflicts of Interest by failing to disclose to her clients that she is receiving additional compensation for promoting and selling Zoratri’s shares. Khadri has also not informed her employer of the additional benefits received for recommending Zoratri’s stock. Therefore her employer cannot evaluate her loyalty and objectivity. She also failed to disclose the additional compensation arrangement.
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