Ethics questions on Mock

[roger009]

Hello All,

I am working on Schweser’s Mock and have encountered a few questions regarding Ethics. Hope someone can shed some light.

1. Are you allowed to present your previous performance data (assuming you are a fund manager) at your new firm without consent (does it matter whether it is in written form or not)? Schweser’s mock seems to say you do not.

2. If you are working for an endowment fund as an investment advisor for FREE, do you need consent from all parties? Assuming it does not take up a lot of your time.

3. How is soft dollar generated? Is it like, a mutual fund company use a brokerage for trade, and the brokerage rebates the mutual fund company some soft dollar, and the mutual fund can use those for research (from the brokerage firm)? If so, how is it possible for a client to donate the soft dollar to charity?

Thank you in advance.

[Mercutio]

“2) If you are working for an endowment fund as an investment advisor for FREE, do you need consent from all parties? Assuming it does not take up a lot of your time.”

To my understanding it depends on whether you are competing with your sidejob against your employer (regarding loyality) or if it reduces your performance at work. If both does not, it should even not matter if there is a compensation included. But please, correct me!

[dicmi]

1. the performance data is property of your previous employer so you cannot use it directly. You can either get it with consent or recreate it using public data and research.

2. I do think you need to disclose. AFAIK, CFAI has a pretty low standard for disclosure. Anything you have doubt on disclosure, its better to disclose it.

3

[roger009]

@Mercutio

“2) If you are working for an endowment fund as an investment advisor for FREE, do you need consent from all parties? Assuming it does not take up a lot of your time.”

To my understanding it depends on whether you are competing with your sidejob against your employer (regarding loyality) or if it reduces your performance at work. If both does not, it should even not matter if there is a compensation included. But please, correct me!

So in the endowment fund case I think it has violated; even if it does not violate loyalty, independent and objectivity would be violated.

@dicmi

1. the performance data is property of your previous employer so you cannot use it directly. You can either get it with consent or recreate it using public data and research.

2. I do think you need to disclose. AFAIK, CFAI has a pretty low standard for disclosure. Anything you have doubt on disclosure, its better to disclose it.

3

That is what I initially though as well.

I encountered a question in Schweser Mock (Vol 2, Exam 2, AM Q2) which implies you do not need written consent from your previous employer to use the performance data. The question meant that adding your previous return to your performance record for your new fund is ok as long as you disclose to client.

2. Agreed