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CFA Level I · CFA Level I Exam · Code of Ethics and Standards of Professional Conduct

A member receives a payment from a mortgage broker for referring her investment clients to the broker. Her employer knows nothing of the arrangement and her clients have not been told. Under Standard VI(C) Referral Fees, the member should most appropriately:

She should disclose the referral arrangement to her employer and clients before making any referral, so they can evaluate the recommendation and its possible bias. Delaying disclosure or staying silent because the broker is good does not meet the standard.

  1. Adisclose the arrangement to her employer and clients before making any referralCorrect
  2. Bwait until the broker has completed work for the clients before telling them
  3. Ckeep the payment private if the broker's services are of good quality

Explanation

Standard VI(C) requires members and candidates to disclose to their employer, clients and prospective clients, as appropriate, any compensation or benefit received or paid for the recommendation of products or services. Disclosure must be made before services are provided so clients can evaluate the recommendation. Good service quality does not remove the need for disclosure.

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