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CFA Level I · CFA Level I Exam · Guidance for Standard IV: Duties to Employers

A portfolio manager plans to accept a performance bonus offered directly by a client, in addition to the employer's compensation. Which disclosure to the employer most appropriately meets the compliance practices under Standard IV(B)?

The most appropriate approach is to disclose the nature, approximate amount and duration of the arrangement to the employer through a supervisor or compliance officer, with the paying client confirming the details. A vague notice or disclosure to third parties does not meet the compliance practices.

  1. ANotifying the supervisor only that a bonus exists, with details provided if the employer asks
  2. BDisclosing the nature, approximate amount and duration of the arrangement through the supervisor or compliance officer, with the client confirming the detailsCorrect
  3. CDisclosing the arrangement to the client's other advisers so that they can monitor any resulting conflicts

Explanation

Compliance practices require disclosure to the employer, through the supervisor or compliance officer, of the terms: nature, approximate amount and duration. The party offering the compensation should acknowledge and confirm the details. A bare notice or disclosure to outsiders falls short.

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