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

A senior portfolio manager sits on the board of a listed company and receives free family membership at its facilities instead of fees. He recommends the stock for suitable client accounts and tells his employer nothing because he receives no money. His conduct most likely:

His conduct violates Standard IV(B). Benefits received for board service, even without money, can create a conflict of interest, here an incentive to recommend the company's stock, so he must disclose them to his employer and obtain consent.

  1. Acomplies with Standard IV(B) because no monetary compensation was received
  2. Bviolates Standard IV(B) because nonmonetary benefits for board service must be disclosed to the employerCorrect
  3. Ccomplies with Standard IV(B) because the stock was recommended only for suitable accounts

Explanation

Nonmonetary compensation can create a conflict of interest in the same way as pay for serving as a director. The manager has a personal incentive to recommend the stock, so he needed to disclose the benefit to his employer. Suitability of the recommendation does not remove the disclosure duty.

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