Example 7 restated: Edward grant, who directs a large amount of his commission business to a New York- based brokerage house, receives appreciation from the brokerage house in the form of 2 tickers to the World Cup, 2 nights at a resort with meals, and transportation via limousine. Grant fails to disclose receiving this package to his supervisor.
Restated comment of CFA book: Grant violated Standard I(B) for accepting substantial gifts which could cause loss of independence and objectivity.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------My question: Is it not suppose to be because Grant failed to disclose the gifts? I mean if we were to compare it with Example 8, we could see that although Theresa Green recieved a reward from her client for achieving higher than an agreed benchmark, she did not violate due to the fact that she disclosed the gift to the employer.
I thin I(B) states that it has to be differentiated between gifts from clients and gifts from individuals seeking to gain influence. Gifts from clients can generally be accepted with disclosure to the employer.
If a third party tries to gain influcence with gifts or similar, written permission from employer is necessary…
Accepting the gift could give the impression that he’s using that broker because they give him gifts, not because they give the best execution for his clients. That a violation of I&O. Whether he discloses the gift or not.
In the real world, that can be a difficult question to answer.
On the exam, it’s easy, because the point of the question isn’t for you to decide whether something’s substantial or not, it’s to see if you know what to do when it is and when it isn’t. The gifts on the exam will be a baseball cap (not substantial), or a week’s paid skiing vacation in Aspen (substantial).