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

A portfolio manager at an asset management firm learns that applicable law in her country does not require disclosure of referral fees she receives for recommending an investment product to clients. The CFA Institute Code and Standards do impose a disclosure obligation. Which action is most appropriate for the manager?

The manager should disclose the referral fees. When applicable law and the Code and Standards differ, members and candidates must follow the more strict of the two, and the Code and Standards require disclosure of referral fees even where the law does not.

  1. AFollow local law and omit disclosure, because the law is the governing authority
  2. BDisclose the referral fees, because the more strict of the law or the Code and Standards appliesCorrect
  3. CDisclose the fees only to clients who ask, because the law is silent

Explanation

When applicable law and the Code and Standards require different conduct, members and candidates must follow the more strict. The Code and Standards require disclosure of referral fees even where law does not. Option A applies the less strict rule, and option C leaves disclosure dependent on client requests.

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