91.6 Guidance for Standard IV

John Hill, CFA, violated Standard IV(A), Loyalty to Employer, by:

If a member or candidate wishes to engage in independent practice that may conflict with her employer's interests, she is least likely required to notify her employer of:

According to CFA Institute Standards of Professional Conduct, which of the following statements about Tripp's ability to delegate supervisory duties is most accurate?

An analyst belongs to a nationally recognized charitable organization, which requires dues for membership. The analyst has worked out a deal where he provides money management advice in lieu of paying dues. Which of the following must the analyst do?

Chris Babcock, CFA, should:

Frost learns that the fund has experienced severe style drift, and now has a significant proportion invested in technology and internet stocks. Frost is most likely:

What is Stewart's most appropriate course of action?

According to the Code and Standards, Bob Douglas, CFA, may:

The analyst needs to:

According to Standard IV(C), Edwin McNeill, CFA, has:

Valley needs to inform Advisors of:

Analysts who undertake independent consulting practice must get permission from their employer and should disclose all of the following EXCEPT:

Did Brown or Turley violate CFA Institute Standards of Professional Conduct?

Under what conditions may Blackwell accept the arrangement?

If a member or candidate wishes to engage in independent practice that may conflict with her employer's interests, which of the following is true?

Nicholas Brynne is most likely:

Wanda Kirby should:

Hatcher's least likely violation of duty to Elite is:

Hal Crane, CFA, must:

With respect to Standard IV(A) Loyalty, Fernando Abrea:

Which example of supervisory responsibility is consistent with the Code and Standards?

According to Standard IV(B), Jill Marsh needs to:

According to CFA Institute Standards of Professional Conduct, which of the following statements about Thompson's duty to Nationwide is NOT correct?

Francisco Perez can run into trouble if he:

John Hill, CFA, has most likely:

Which of the following statements is most accurate about the Standard concerning the responsibilities of supervisors?

Mark Roberts violated CFA Institute Standards because:

Jane Talbot, CFA, is required to disclose:

Which of the following statements is least likely a recommended procedure for supervisors under Standard IV(C)?

John Hill, CFA, has been working for Advisors, Inc., for eight years. Hill is about to start his own money management business and has given his two-week notice of his resignation from Advisors. A few days before his resignation takes effect, he takes out a loan from a bank on behalf of his new business and uses the money to buy some office equipment for his new business. Since he engaged in these transactions while still an employee of Advisors, Hill violated Standard IV(A), Loyalty to Employer, by:

If a member or candidate wishes to engage in independent practice that may conflict with her employer's interests, she is least likely required to notify her employer of:

According to CFA Institute Standards of Professional Conduct, which of the following statements about Tripp's ability to delegate supervisory duties is most accurate?

Which of the following must an analyst do if he provides money management advice in lieu of paying dues to a charitable organization?

Chris Babcock, CFA, a portfolio manager for a large Texas investment firm, has been offered compensation in addition to what her firm pays her. The offer is from one of her clients and the additional compensation will be based on her yearly performance in excess of the market index. Babcock should:

Frost is most likely:

What is Jennifer Stewart's most appropriate course of action in trying to convince management to adopt a compliance program?

According to the Code and Standards, Bob Douglas, CFA, may:

The analyst working at an investment firm must:

Edwin McNeill, CFA, has most likely:

Bill Valley must inform Advisors of:

Analysts who undertake an independent consulting practice while employed must get permission from their employer and should disclose all of the following EXCEPT:

Did Brown or Turley violate CFA Institute Standards of Professional Conduct?

According to the Standard concerning loyalty, under what conditions may Blackwell accept the arrangement?

Which of the following interpretations of the Code and Standards is most accurate regarding Korthauer's incentive bonus?

Nicholas Brynne is most likely:

If Kirby cannot discharge supervisory responsibilities because of an inadequate compliance system, she should:

Which of the following activities is least likely a violation of Hatcher's duty to Elite?

According to Standard IV(C), Crane must:

With respect to Standard IV(A) Loyalty, Fernando Abrea:

According to Standard IV(C), responsibilities of supervisors, which statement best describes Miller's responsibilities if she delegates some of her supervisory duties?

Which of the following steps would most likely violate Standard IV(A) Loyalty for Jacob Allen?

Which of the following statements about members with supervisory responsibility is least accurate?

What must Saul do according to CFA Institute Standards of Professional Conduct when offered to sit on Fairway’s Board of Directors?

Which of the following activities will least likely constitute a violation of Standard IV(A), Loyalty?

Sue Parsons needs to:

According to the Code and Standards, Jill Borowski, CFA, is required to treat the proposal of using the family's vacation home as:

John Hill, CFA, has been working for Advisors, Inc., for eight years. Hill is about to start his own money management business and has given his two-week notice of his resignation from Advisors. A few days before his resignation takes effect, on his lunch hour, he takes out a loan from a bank on behalf of his new business and uses the money to buy some office equipment for his new business. Since he engaged in these transactions while still an employee of Advisors, Hill violated Standard IV(A), Loyalty to Employer, by:

If a member or candidate wishes to engage in independent practice that may conflict with her employer's interests, she is least likely required to notify her employer of:

Martin Tripp, CFA, is vice-president of the equity department at Walker Financial, a large money management firm. Of the twenty analysts in his department for whom he has supervisory responsibility, eight are subject to CFA Institute Standards of Professional Conduct. Tripp believes that he cannot personally evaluate the conduct of the twenty analysts on a continuing basis. Therefore, he plans to delegate some of his supervisory duties to Sarah Green, who is subject to the Standards, and some to Bob Brown, who is not subject to the Standards. According to CFA Institute Standards of Professional Conduct, which of the following statements about Tripp's ability to delegate supervisory duties is most accurate?

An analyst belongs to a nationally recognized charitable organization, which requires dues for membership. The analyst has worked out a deal where he provides money management advice in lieu of paying dues. Which of the following must the analyst do?

Chris Babcock, CFA, a portfolio manager for a large Texas investment firm, has been offered compensation in addition to what her firm pays her. The offer is from one of her clients and the additional compensation will be based on her yearly performance in excess of the market index. Babcock should:

May Frost, CFA, is an equity research analyst for a "precious metals mining" exchange traded fund which has recently started significantly outperforming its benchmark after several years of stagnation. Upon investigating the source of the outperformance, Frost learns that the fund has experienced severe style drift, and now has a significant proportion of its resources invested in technology and internet stocks. Frost reviews the fund's prospectus and learns the current sector weighting violates multiple prospectus covenants. Frost contacts her supervisor and the fund's compliance department and is told the portfolio weighting is not her responsibility and that she should not pursue the matter further. Frost reviews the firm's whistleblower policy, contacts personal legal counsel, and then contacts regulatory authorities regarding the style drift and prospectus violations. Frost is most likely:

Jennifer Stewart, CFA, a supervisor at an investment advisory firm, has tried unsuccessfully to convince top management of the firm's need for a formal, comprehensive compliance program. What is Stewart's most appropriate course of action?

Bob Douglas, CFA, is considering leaving his current employer to compete in the same field. He did not sign a non-compete clause when he was hired. According to the Code and Standards, he may:

An analyst working at an investment firm has a client that rents limousines. The client tells the analyst that as long as he is the client's analyst, he can have free use of a limousine several times a year. The analyst needs to:

Edwin McNeill, CFA, is a senior trader for Grey Securities. In his monthly review of his team's activity, McNeill notices a series of suspicious trades by one of the traders. McNeill consults his manager, who agrees that these trades are a potential violation. McNeill informs the trader that her duties will be restricted while these trades are being investigated and refers the matter to Grey's compliance officer for further action. McNeill has:

Bill Valley has been working for Advisors, Inc., for several years, and he just joined CFA Institute. Valley's sister just received a large bonus in the form of stock options in Zephyr, Inc. Valley's sister knows nothing about financial assets and offers Valley a week at her holiday home each year in exchange for Valley monitoring Zephyr and the value of her stock options. In order to comply with the Code and Standards, Valley needs to inform Advisors of:

Analysts who undertake an independent consulting practice while employed must get permission from their employer and should disclose all of the following EXCEPT:

Selma Brown, CFA, is a portfolio manager for Mainland Securities. Rick Wood, one of her clients and owner of Wood Fitness Centers, offers to permit Brown and her immediate family to use the facilities at his fitness centers at no cost during 2003. To get this benefit, Brown must achieve on Wood's portfolio at least a 2-percentage point return above the total return on the S&P's 500 index during 2002. Brown orally informs her immediate supervisor of the nature and duration of the proposed arrangement. Arnold Turley, a CFA Institute member, is a portfolio analyst at Mainland Securities. He was just elected to the Board of Directors for Omega Services, which pays him $1,000 plus expenses for attending each of its quarterly board meetings. Turley e-mails Mainland's compliance officer informing her of this arrangement with Omega and receives a reply informing him that the agreement is acceptable. Did Brown or Turley violate CFA Institute Standards of Professional Conduct?

Jason Blackwell, CFA, works as an investment banker for Mega Capital. Sylvia Lego, a friend of Blackwell who has an independent investment advisory practice, asks Blackwell to help her review client portfolios during evenings and weekends for a fee. According to the Standard concerning loyalty, under what conditions may Blackwell accept this arrangement?

Nancy Korthauer, CFA, has launched a new hedge fund called the Korthauer Tautology Fund but has had trouble hiring analysts who are CFA charterholders as well as with finding clients. She offers a $15,000 incentive bonus to any charterholder who joins the firm with over $1 million in committed client investments. Which of the following interpretations of the Code and Standards is most accurate?

Nicholas Brynne, CFA, develops a trading model while working for CE Jones, an investment management firm. By working on the model at home from his personal computer, Brynne is able to devote additional work hours. Although the trading model is successful, Brynne loses his job in a company restructuring, and decides to start his own practice using the trading model. Nicholas is most likely:

Wanda Kirby, CFA, recently joined Allegheny Investments as a senior analyst. Because of her extensive experience in the investments business and knowledge of the Code and Standards, Allegheny's management asked her to assume supervisory responsibility. Kirby reviewed Allegheny's existing compliance system and determined that it was inadequate to allow her to clearly discharge her supervisory responsibility. According to CFA Institute Standards, Kirby should:

Theresa Hatcher, CFA, is making arrangements to establish her own investment advisory business before terminating her relationship with her current employer, Elite Brokers, Inc. Elite is a small company consisting of only six investment professionals and a small support staff. According to CFA Institute Standards of Professional Conduct, which of the following activities is least likely a violation of Hatcher's duty to Elite?

A firm recently hired Hal Crane, CFA, to be a supervisor in the firm. Crane has reviewed the procedures for complying with the Code and Standards in the company. It is Crane's belief that the procedures need revision in order to be effective. Crane must:

Fernando Abrea, CFA was an analyst for Pacific Investments. In October he left Pacific and joined Global Securities as manager of a local office. Abrea's change of employment came about in the following manner:

• In April, Abrea contacted Global about a possible position he saw advertised in a financial publication and had exploratory meetings with Global.
• In July, Abrea submitted a strategic plan to Global and signed an agreement to join Global. He then contracted for office space on behalf of Global.
• On October 15, Abrea's resignation from Pacific became effective. He did not take any client lists from Pacific.
• On October 16, Abrea mailed a letter that explained his new undertaking with Global to prospective clients, including his former clients at Pacific.

With respect to Standard IV(A) Loyalty, Abrea:

Which of the following examples of supervisory responsibility is consistent with the requirements of the Code and Standards?

Jill Marsh, CFA, works for Advisors where she manages various portfolios. Marsh's godfather is an accountant and has done Marsh's tax returns every year as a birthday gift. Marsh's godfather has recently become a client of Advisors and asked specifically for Marsh to manage his account. In order to comply Standard IV(B), Disclosure of Additional Compensation Arrangements, she needs to:

Janet Thompson, CFA, is employed as an analyst by Nationwide Securities. According to CFA Institute Standards of Professional Conduct, which of the following statements about Thompson's duty to Nationwide is NOT correct? Thompson must refrain from:

Francisco Perez, CFA, is an equity research analyst for a long-term investment fund. The fund is seeking new clients, so Perez contacts old clients he knew through his former employer. Which of the following is most accurate?

John Hill, CFA, has been working for Advisors, Inc., for eight years. Hill is about to start his own money management business and has given his two weeks' notice of his resignation from Advisors. A few days before his resignation takes effect, Rod Bright, a former client of Advisors, calls Hill at his home about his new firm. Bright says that he is very happy that Hill is leaving Advisors because now he and Hill can resume a professional relationship. Bright says that he would never become a client of Advisors again. Hill promises to call Bright back after he has left Advisors but takes no further action. Hill does not tell Advisors about the call. Hill has most likely:

Which of the following statements is most accurate about the Standard concerning the responsibilities of supervisors?

Mark Roberts has resigned from a local investment advisory firm and begun working at Benjamin Investments. Without getting approval from his supervisor at Benjamin, Roberts uses a phone book to find the contact information of his old clients and asks for their continued business. Has Roberts violated any CFA Institute Standards of Professional Conduct?

Jane Talbot, CFA, is a portfolio manager at Cavalier Investments. Talbot manages the account of Wendall Wilcox. The performance of Wilcox's portfolio has been below that of the benchmark portfolio, the S&P 500, for the past several years. In an effort to enhance his portfolio's performance, Wilcox offers to pay Talbot $2,000 each year that his portfolio's return exceeds that of the S&P 500. Wilcox suggests this arrangement last for the next three years. According to the Code and Standards, Talbot is required to:

To comply with Standard IV(B), Additional Compensation Arrangements, members should do all of the following EXCEPT:

Sharon West is a CFA charterholder and trust officer for REO Trust Company. Soon after beginning work for REO, West finds that REO has been conducting all its securities transactions through her brother who is a registered representative. West's brother charges REO commissions that are equal to the lowest available from another broker. West's brother tells her that if she continues doing business with him, he will give her a substantial discount on all personal transactions she conducts through him. West:

Michel Marchant, CFA, recently became an independent money manager. After six months, he has only ten clients. To supplement his income, Marchant accepted employment as an advisor at Middleton Financial Advisors. According to Standard IV(A) Loyalty, Marchant is required to:

Grant Starks, CFA, has been working for Advisors, Inc., for eight years. Starks is about to start his own money management business and has given his two-week notice of his resignation. A few days before his resignation takes effect, a current client of Advisors calls him at his office to inquire about some services for her account at Advisors. During the conversation, Starks tells the client that his new business will have lower commissions than Advisors. Starks has most likely violated the Standard concerning:

An analyst needs to inform his supervisor in writing of which of the following?

All of the following activities might constitute a violation of Standard IV(A), Loyalty to Employer, EXCEPT:

Which of the following statements regarding employee/employer relationships is NOT correct?

Dixie Miller, a Level II CFA candidate, heads the research department of a large brokerage firm. The firm has many analysts, some of whom are subject to the CFA Institute Code of Ethics and Standards of Professional Conduct. If Miller delegates some of her supervisory duties, which statement best describes her responsibilities under the CFA Institute Code and Standards?

Jacob Allen, CFA, decides he could make more money if he started his own company. Which of the following steps would most likely violate Standard IV(A) Loyalty?

According to the CFA Institute Standards of Professional Conduct, which of the following statements about members with supervisory responsibility is least accurate? Members with supervisory responsibility:

Nick O'Donnell, CFA, unsuspectingly joins the research team at Wickett & Co., an investment banking firm controlled by organized crime. None of the managers at Wickett are CFA Institute members. Because of his tenuous situation at Wickett, O'Donnell begins making preparations for independent practice. He knows he will be terminated if he informs management at Wickett that he is preparing to leave. Consequently, he determines that "if he can just hang on for one year, he will likely have a client base sufficient for him to strike out on his own." This action is:

David Saul, CFA, heads the trust department at Savage National Bank. Fairway Enterprises invites Saul to sit on its Board of Directors. In return for his services on the Board, Fairway offers to provide Saul and his family with access to the facilities at Wilmont Country Club at no cost. Saul will not receive any monetary compensation for his services on the Board. According to CFA Institute Standards of Professional Conduct, which of the following actions must Saul take?

Which of the following activities will least likely constitute a violation of Standard IV(A), Loyalty?

Dave Kline, CFA, is a personal investment advisor with 200 individual, family, and corporate accounts. After a dispute with a coworker on margin policy, he formally resigns his position by giving suitable notice. However, he does not follow his firm's established "Transition and Exit Policies" regarding his accounts. The firm's stated policies require him to notify each client of his planned departure and personally introduce them to their new account representative, Greg Potter. Kline sees Potter as a rival and states "...let Potter do his own work and find his own clients." Kline is most likely:

Sue Parsons, CFA, works full-time as an investment advisor for the Malloy Group, an asset management firm. Parsons wants to engage in independent practice in which she would advise individual clients on their portfolios. She would conduct these investment activities only on weekends. She is currently only in the preparation stage and has not started independent practice yet. The Standard concerning loyalty:

Brian Bellow, CFA, is a portfolio manager for Progressive Trust Company. Several friends have asked Bellow to review their investment portfolios. On his own time, Bellow examines their portfolios and makes several recommendations. He accepts no compensation from his friends for his investment advice. According to CFA Institute Standards of Professional Conduct, did Bellow violate his duty to Progressive Trust?

Which of the following is least likely a recommended procedure for supervisors and compliance officers to comply with Standard IV(C) Responsibilities of Supervisors?

Which of the following statements is most correct concerning a member's obligation to his or her employer under the Code and Standards?

Which of the following statements is most correct under the Code and Standards?

Pamela Gee is a portfolio manager. She is planning to establish her own money management firm. She has already informed her employer, Branford, Inc., about her plans. In her remaining time at Branford, she may:

Bill Fence, CFA, supervises a group of research analysts, none of whom have earned the CFA designation (nor are they CFA candidates). On several occasions he has attempted to get his firm to adopt a compliance system to ensure that applicable laws and regulations are followed. However, the firm's principals have never adopted his recommendations. Fence should most appropriately:

A CFA Institute member, undertaking independent practice that could result in compensation or other benefit:

Which of the following statements is least accurate with regard to the Standard concerning loyalty to employers?

When a CFA Institute member who is presently employed by a firm undertakes any independent practice, he must do all of the following EXCEPT:

Jack Salyers, CFA, is considering starting his own firm to compete with his current employer. He takes several actions before turning in his resignation. Which of the following actions least likely violates the Standard concerning loyalty? Salyers:

Jill Borowski, CFA, works for Advisors where she manages a portfolio for a wealthy family. Marsh earns 1% of the portfolio's value each year in the form of a commission from Advisors. The family just told her that any year the portfolio she manages earns more than a 10% return, the family will give her the use of the family's vacation home for one week. With respect to the Code and Standards, this proposal most accurately represents:

John Hill, CFA, has violated Standard IV(A), Loyalty to Employer, by:

If a member or candidate wishes to engage in independent practice that may conflict with her employer's interests, she is least likely required to notify her employer of:

According to CFA Institute Standards of Professional Conduct, which of the following statements about Tripp's ability to delegate supervisory duties is most accurate?

Which of the following must the analyst do?

Babcock should:

Frost is most likely:

What is Stewart's most appropriate course of action?

Douglas may:

The analyst needs to:

McNeill has:

In order to comply with the Code and Standards, Valley needs to inform Advisors of:

When a CFA Institute member engages in independent consulting, which provides least required information?

According to Standard IV(B), Talbot is required to:

Solicitation of the employer's clients prior to termination of employment would constitute a violation of Loyalty to Employer.

Which of the following statements regarding employee/employer relationships is NOT correct?

Miller retains supervisory responsibilities for those duties delegated to her subordinates.

Which of the following statements about members with supervisory responsibility is least accurate?

John Hill, CFA, violated Standard IV(A), Loyalty to Employer, by:

If a member or candidate wishes to engage in independent practice that may conflict with her employer's interests, she is least likely required to notify her employer of:

According to CFA Institute Standards of Professional Conduct, which of the following statements about Tripp's ability to delegate supervisory duties is most accurate?

Which of the following must the analyst do regarding his membership in a charitable organization?

Chris Babcock, CFA, should:

Frost is most likely:

What is Stewart's most appropriate course of action regarding the need for a formal compliance program?

According to the Code and Standards, Bob Douglas, CFA, may:

The analyst needs to:

According to Standard IV(C), McNeill has:

In order to comply with the Code and Standards, Valley needs to inform Advisors of:

Analysts must disclose all of the following EXCEPT:

Did Brown or Turley violate CFA Institute Standards of Professional Conduct?

According to the Standard concerning loyalty, under what conditions may Blackwell accept the arrangement?

According to Standard IV(A), which of the following interpretations is most accurate regarding Korthauer Tautology Fund?

According to Standard IV(A), Nicholas is most likely:

According to Standard IV(C), Kirby should:

For Standard IV(A) Loyalty, Hatcher engages in:

According to Standard IV(C), Crane must:

With respect to Standard IV(A) Loyalty, Abrea:

Which of the following examples of supervisory responsibility is consistent with the requirements of the Code and Standards?

According to Standard IV(B), Jill Marsh, CFA, needs to:

According to Standard IV(A), which of the following statements is NOT correct?

Which of the following is most accurate regarding Perez contacting old clients?

In regard to Hill's conversation with Bright, Hill has most likely:

Which of the following statements is most accurate regarding the supervisory responsibility?

Roberts has not violated the Standards because:

About Talbot, the Code and Standards require her to:

To comply with Standard IV(B), members should do all of the following EXCEPT:

According to Standard IV(B), West must:

With respect to the Code and Standards, Borowski's proposal: