CFA CFA Level 1 Question of the Week

Question of the Week

  • This topic has 7 replies, 5 voices, and was last updated Oct-17 by leeblevy.
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    • AdaptPrep
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      Ethical and Professional Standards

      Mutual fund XYZ offers Lisa a 1% commission for adding the fund to her clients’ portfolios. If Lisa is a CFA member, which of the following actions do the Standards of Professional Conduct allow Lisa to take?

      I. Decline to add fund XYZ to the clients’ portfolio
      II. Refuse to take commission for fund XYZ
      III. Disclose the commission, then add fund XYZ to the clients’ portfolio

      A. I only
      B. I and II
      C. I, II, and III

    • hairyfairy
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      B…?

    • fabian
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      My money is on B as well.

    • AdaptPrep
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      The correct answer is actually C.

      Solution:

      Section VI.C of the Standards: Referral Fees. Members and Candidates must disclose to their employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from or paid to others for the recommendation of products or services.

      Lisa is allowed to do (I), (II), and (III) according to the Standards. She has to make the necessary disclosures if she wishes to add fund XYZ to the client’s portfolio. Lisa is NOT allowed to add the fund without disclosing the commission.

    • edulima
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      Great idea to do “question of the week”, and Ethics is a great subject for this as it applies to all levels.

    • fabian
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      Damn. When in doubt. always choose all. Agree with @edulima – this is a great idea. Thanks @PassedTense‌!

    • hairyfairy
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      Dang it. Thanks for the answer @PassedTense‌

    • leeblevy
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      Answer C is correct only if Lisa is diligent and concludes that adding Mutual fund XYZ would be beneficial for her client’s portfolio

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