A potential client contacted an employee and wanted detailed performance records of client accounts so he can decide whether to invest with the firm."

A potential client contacted an employee and wanted detailed performance records of client accounts so he can decide whether to invest with the firm."

Basch goes on to say that she is responsible for developing a presentation on the differences between the Prudent Investor and the Prudent Man rules for managing trust portfolios. Basch explains to Cooken that the Prudent Investor rule requires a trustee to exercise five fiduciary standards in managing the assets of a trust account, including care, skill, caution, loyalty, and impartiality. She states that although there are many differences between the Prudent Man and the newer Prudent Investor rule, one element of continuity is the duty of the trustee to delegate investment authority in the event that the trustee lacks sufficient investment knowledge.

Toward the end of the lunch meeting, Basch suggests that in exchange for research published by Cooken and Khasko, Basch can have portfolio managers at her firm send clients that are too small for their firm to Khasko. Since Khasko specializes in clients with smaller portfolios, the arrangement sounds like a good idea to Cooken. Cooken tells Basch that she will think the arrangement over and get back with her next week with a decision.

By not telling Zonding about the bartending position, Cooken has most likely violated:
A . no Standards.
B . Standard IV(B) Additional Compensation Arrangements.
C . Standard IV(A) Loyalty (to employer) and Standard IV(B) Additional Compensation Arrangements.

View Answer

Answer: A

Explanation:

Standard IV(A) Loyalty (to employer) requires that members and candidates act for the benefit of their employer and not deprive the employer of their skills and abilities. In addition, members and candidates must not cause harm to their employers. It’s safe to say that a bar does not compete with a stock-analysis company, and a 6-hour-a-week part-time job should not interfere with her ability to perform analysis duties. Standard IV(B) Additional Compensation Arrangements relates to additional compensation related to an employee’s services to the employer. The moonlighting is not related to her analysis job and, as such, does not violate the standard. There is nothing inherently unethical about working as a bartender, and moonlighting as a barkeeper does not compromise Cooken’s professional reputation, integrity, or competence. Thus, Standard 1(D) Misconduct has not been violated. (Study Session 1, LOS 2.a)