93 Ethics Application

Deloris Johnson's Supervisory Violation

• Deloris Johnson, a CFA, must dissociate from her supervisor's activities after observing a federal securities regulation violation.
• Dissociation can include asking to be reassigned.
• Johnson isn't required to report supervisor violations to regulatory bodies unless mandated by law.
• Discussing the violation with the company's compliance department fulfills Johnson's obligation to stop the violation.

Calvin Doggett and PCP Inquiry

• Calvin Doggett, a CFA, must cooperate with the CFA Institute Professional Conduct Program (PCP)
• The cooperation is related to allegations of unsuitable investment actions.
• Doggett doesn't violate the Code and Standards by revealing client names, financial conditions, and investment objectives to the PCP.
• Standard III(E) requires maintaining client confidentiality; PCP investigations are an exception, because the Program keeps client information confidential.

Seminole Equity Fund Performance Presentation

• A fund manager of Seminole Equity Fund presents the fund's most recent five-year performance history.
• The fund has been around for eight years.
• Indicating that more detailed information is available upon request follows the Code and Standards.
• Standard III(D) permits brief presentations with the option for more details, as long as the presentation isn't misleading to clients or prospects.

Heidi Krueger's Use of Soft Dollars

• Heidi Krueger, a CFA, uses soft dollars from client accounts.
• Soft dollars were used to purchase an economic impact report and an office conference table.
• Using soft dollars only violates standards for purchasing office furniture.
• Purchasing research reports with soft dollars doesn't violate standards if it benefits clients.

Nancy Hall's Expense Reimbursement

• Nancy Hall, a CFA candidate, stayed with her sister during a company trip but included a $100 hotel charge in her expenses.
• Hall disclosed this to her supervisor and returned the $100.
• Hall engaged in professional misconduct due to dishonesty, fraud, and deceit.

Mary Hiller's Role in Daughter's Skating Club

• Mary Hiller, CFA, is a senior analyst and board member of her daughter's skating club.
• Hiller advises the club without pay, using mutual fund practices, receiving only a free $182 monthly membership for her daughter.
• Hiller must obtain prior permission from her employer before making recommendations to the Skating Club.
• Standard IV(A) stipulates informing the employer about outside consulting, including duration, compensation and obtaining permission to proceed.

Robert Hamilton's Research Report on Pets-R-Us

• Robert Hamilton, a CFA candidate, prepared a report on Pets-R-Us with unfavorable earnings forecasts.
• Linda Brisson, the company president, revised Hamilton's earnings forecasts to show an upward trend.
• Hamilton included Brisson's revisions without further review, emphasizing projected earnings.
• Hamilton violated the Standard as he did not thoroughly review and analyze the information provided by Brisson.
• Standard V(B) allows seeking review for factual inaccuracies, but information should be analyzed carefully.

Vijay Gill's Referral Fee Disclosure

• Vijay Gill, CFA, leases space from Land Bank and pays 20% of fees from Land customers to Land.
• Gill receives fees from Bloom Insurance Advisors for client referrals.
• Gill must disclose both the Land Bank and Bloom arrangements to Randolph Song, who is a Land Bank customer.
• Standard VI(C) Referral Fees requires disclosure to clients of any benefits given or received for recommendations.

Ralph Lim, Susan Bland, and CFA Program Level

• Ralph Lim and Susan Bland both passed Level I of the CFA Program and are enrolled for Level II.
• Lim's business card says "Ralph Lim, CFA Level I," and Bland's resume says "Level II Candidate."
• Lim violated the CFA Institute Standards, but Bland didn't because there is no CFA designation for passing Level I, II, or III of the exam.
• Candidates can state that they have completed levels I, II, or III of the CFA Program.

Paul Thomas's Use of Stock Charts

• Paul Thomas, CFA, uses stock charts in research reports without citing their source.
• Thomas violated CFA Institute Standards of Professional Conduct.
• Standard I(C) Misrepresentation says you should not use material prepared by others without acknowledgement.

Gordon and Haney's Exam Discussion

• Lindsay Gordon and Steve Haney are Level II CFA candidates in the same exam window.
• Gordon suggested Haney remember exam questions; Haney only gave general topics.
• Both Gordon and Haney violated Standard VII(A): you cannot compromise the integrity of the CFA Institute Programs.
• This standard prohibits candidates from discussing questions or topics covered on the exam.

Jan Hirsh and Advisors, Inc.

• Jan Hirsh, CFA, manages a college endowment and transacts through Advisors, Inc.
• Advisors offers Hirsh better service on her personal account if accounts exceed the minimum.
• Hirsh must receive the college’s permission before accepting this benefit.
• Standard IV(B) Additional Compensation Arrangements requires written permission from the employer before accepting benefits that may cause conflict.

Lance Tuipulotu and Subadvisers

• Lance Tuipulotu, CFA, manages investments and wants to include non-investment-grade bonds.
• Tuipulotu should least likely use consistently high historical returns as a criteria for selecting a subadviser.
• Standard V(A) Diligence and Reasonable Basis says you should evaluate the adviser's code of ethics, its compliance procedures and internal controls, its investment processes and adherence to its stated strategies, and the quality of its published information on returns.

Bolt, Delvecco, and Dupree Asset Management

• Ray Bolt, CFA, is on Midwest University's board and endowment chairman, but didn't tell Dupree.
• Wanda Delvecco, a CFA candidate, bought 200 shares of Aveco before writing a "buy" recommendation, but didn't tell Dupree
• Both Bolt and Delvecco violated the Standards.
• Standard VI(A) requires Bolt informing Dupree of his role, because it will be time-consuming. Delvecco has to discuss owning the stock with her supervisor.

Lisa Pierce and Lander Manufacturing

• Pierce is researching Lander Manufacturing and learns about a potential Gilbert Controls contract.
• Pierce proceeds to acquire Lander Manufacturing shares for client accounts.
• She should, because Standard II(A) allows this because this is the mosaic theory.

Jess Green and Compliance Procedures

• Jess Green, CFA, is the research director at Castle Investment and has supervisory responsibilities.
• Green should incorporate a professional conduct evaluation for all eight analysts under his supervision.

Gordon McKinney and Trust Department

• Gordon McKinney, CFA, works in a bank's trust department and learns about a company buyback at a 15% premium.
• McKinney tells his mother-in-law to tender her shares, and waits until the end of the day to tender it to the trust's shares.
• McKinney violated the Standard concerning priority of transactions.
• Standard VI(B) says that they must give the customers or employee adequate opportunity to act on this recommendation before acting on his own behalf.

Steve Waters and Farmco Stock

• Steve Waters, a Level I CFA candidate, wants to enter a long position of Farmco stock.
• Waters engages in a series of block trades due to Farmco being thinly traded.
• Waters violates Standard II(B) Market Manipulation.
• Neither transaction-based manipulation nor information-based manipulation was committed.