ETHICS Queries

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ETHICS Queries

Postby deepakkrkanodia » Wed Feb 06, 2013 7:35 pm

Q1 under duties to employers, it is stated that “ the codes and standards do not prohibit former employees from contacting clients of their previous firms, in the absence of noncompeting agreement”

Query: from the above statement, does it means that former employees can contact clients of their previous firms, if non-competing agreement does not exists and cannot contact them if non-competing agreement exists. If that means, what is meant by contact here? Does it means contacting with the database the employee if he has with him.

Q2. Under conflicts of interest, it is stated that “ important is the disclosure of agreements In which the firm benefits directly from investment recommendations. An obvious conflict of interest is the rebate of a portion of service fee some classes of mutual funds charge to investors”

Query: please explain the above second statement as how rebate is used here.

Q3. Under conflicts of interest, it is stated that “the potential for conflicts of interest exists with broker sponsored limited partnerships formed to invest venture capital. Increasingly, members and candidates are expected not only to follow issues from these partnerships once they are offered to the public, but also to promote the issues in the secondary market after public offerings”

Query: please explain above in simple language as could not understand why conflict of interest here

Q4. If an employee is called by any company official for knowing about company future prospects and the host pays for travel expense, then should the employee accept the travel expense or not.

Query : in cfa institute book and schweser, different examples about different acceptance of travel expense are stated which contradict with each other, like one example say one should not accept any travel expense and one says one can accept related for the task only, so could not understand which travel expense should employee accept and which should not be accepted. Plz give examples

Q5. ABC Investent Management acquires a new, very large account with two concentrated positions. The firm’s current policy is to add new accounts for the purpose of performance calculation after the first full month of management. Cupp is responsible for calculating the firm’s performance returns. Before the end of the initial month, Cupp notices that one of the significant holdings of the new account is acquired by another company, causing the value of the investment to double. Because of this holding, Cupp decides to account for the new portfolio as of the date of transfer, thereby allowing ABC Investment to reap the positive impact of that month’s portfolio return.
A. Cupp did not violate the Code and Standards because the GIPS standards allow composites to be updated on the date of large external cash flow.
B. Cupp did not violate the Code and Standards because companies are allowed to determine when to incorporate new accounts into their composite calculation.
C. Cupp violated the Code and Standards because the inclusion of the new account produces an inaccurate calculation of the monthly results according to the firm’s stated policies.

Query: please explain the above question in simple language and why the answer is C and neither , nor B.

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