In the context of the Code and Standards, which of the items from the background check would most likely indicate that Zonding should not have hired Cooken?

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.

In the context of the Code and Standards, which of the items from the background check would most likely indicate that Zonding should not have hired Cooken?
A . Item i.
B . Item ii.
C . Item iii.

View Answer

Answer: A

Explanation:

Item (i) is a likely violation of the Code and Standards. Working as a waitress is not a conflict of interest for an investment analyst, but Cooken’s employer can reasonably assume that a 30-hour-a-week side job could be tiring, depriving the company of her skills and ability during her internship which would violate Standard IV(A) Loyalty (to employer).

Cooken’s description of the CFA exam is accurate, and she takes no liberties with a title. Thus she has not violated Standard VII{B) Reference to CFA Institute, the CFA Designation, and the CFA Program.

One conviction as a teenager before working as an investment professional is not a violation of Standard 1 (D) Misconduct. Standard IV(A) Loyalty (to employer) does not hold when illegal activities are involved, and Cooken’s willingness to talk to the FBI would most likely not be considered a violation. The Standards do suggest, however, that the member consult with his employer’s compliance personnel or outside counsel before disclosing any confidential client information. (Study Session 1, LOS 2.a)