Ethics Question

CFA Level III
#1

John works as a portfolio manager in an asset management firm that focuses only on domestic large cap sector.

  1. To improve his portfolio management and analysis skills, he help his friends and family members to manage their personal portfolio earning a small token fee.

  2. He recently started a hedge fund that focuses on market neutral strategy in domestic small cap sector. He only manages the portfolio on his free time.

For the above scenario (1) and (2), does John requires written approval from his current employer and clients.

#2

Not his clients.

His employer if John will deprive his employer of his skills or compete with them. I would say YES to both scenarios, to be safe.

#3

I personally think (1) is quite a clear cut violation.

(2) I would say no since his employer and his hedge fund focus on different strategies. Thus there is no direct conflict of interest.

Of course there is no other information to determine whether his participation in his hedge fund business will deprive his employer of his skills. If there is, then it is a clear violation.

Ethics question are always pretty grey.

#4

Boh activities take time/focus/attention away from his current employer. I can’t imagine either NOT being a violation.

#5

After reviewing again, I think I agree with you totally. Independent practice will require disclosure and written approval from employer with regards to loyalty to employer.