Skip to content

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

Jones, a senior portfolio manager, serves on the board of Exercise Unlimited, Inc. and receives free family gym memberships in return. He recommends the stock for appropriate client accounts and does not tell his employer, reasoning that he receives no money. Jones most likely:

Jones most likely violated Standard IV(B). Nonmonetary benefits such as free memberships can create a conflict of interest just as cash pay can, and he had a personal incentive to recommend the stock. He should have disclosed the benefits to his employer.

  1. Aviolated Standard IV(B) because nonmonetary benefits can create a conflict like cash payCorrect
  2. Bcomplied with Standard IV(B) because only monetary compensation must be disclosed
  3. Ccomplied with Standard IV(B) because the stock was appropriate for the client accounts

Explanation

Nonmonetary compensation may create a conflict of interest in the same manner as being paid to serve as a director. Jones had a personal incentive to recommend the stock and failed to disclose the benefits to his employer. Suitability of the stock does not remove the disclosure duty.

Did you get it right without looking?

One question tells you little. A timed set on Guidance for Standard IV: Duties to Employers shows your real accuracy, how long you take and where you lose marks.

Practise Guidance for Standard IV: Duties to EmployersFree diagnostic mock

More Guidance for Standard IV: Duties to Employers questions