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CFA Level I · CFA Level I Exam · Guidance for Standard VI: Conflicts of Interest

A portfolio manager agrees to pay a fee to an accountant who refers prospective clients to her. Regarding Standard VI(C), the manager is most likely required to:

The manager must disclose the payment to prospective clients before they enter a formal agreement for services. Standard VI(C) covers fees paid to those who refer clients as well as fees received, and appropriate disclosure is made before the agreement.

  1. Adisclose the payment to prospective clients before they enter a formal agreement for servicesCorrect
  2. Bdisclose the payment only after the client has paid the first advisory fee
  3. Cavoid disclosure, because Standard VI(C) covers only benefits that the member receives

Explanation

The guidance says members must also disclose when they pay a fee or provide compensation to others who referred prospective clients. Disclosure must come before entry into any formal agreement for services, so after the first fee is too late, and payments made are covered, not just those received.

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