Q:

Anna Jones, a portfolio manager at XYZ Securities, has handled the retirement fund of ABC Industrial, a large institutional client, for several years. ABC now wishes to hire Anna as a consultant and advisor for its strategic planning. Anna likes working at XYZ Securities and feels she can handle the consulting work in her spare time. Which of the following statements regarding Standard IV-A, Loyalty, is true?
a) While she is encouraged to make full disclosure, Anna has no formal obligation to inform XYZ of her consulting work since there is no conflict of interest.
b) Anna must inform both interested parties, in writing, describing the type of service to be rendered, the duration of services and expected compensation.
c) Anna may take the compensation work for ABC Industrial, so long as she formally documents that she is working a minimum of 40 hours a week for her primary employer.
d ) Anna must refuse all consulting work out of loyalty to XYZ.

A:

The correct answer is: b)

The "duty of loyalty" to one's employer requires full and formal disclosure. Once provided with the information, the employer can then make a sensible judgment as to whether the outside relationship compromises this loyalty.

MORE FAQS

  1. How do I use the PEG (price to earnings growth) ratio to determine whether a stock is overvalued?

  2. Which of the following is a horizontal spread? a) Buy 1 FBN Aug 50 Call; Long 1 XYZ Aug 50 Put b) Write ...

  3. What is the difference between a long position and a call option?

  4. If a country's currency is determined by the strength of its economy, why isn't the U.S. dollar worth more than the British pound?

  5. Why would my stock's value decline despite good news being released?

  6. If ABC corporation, which is listed on the New York Stock Exchange ...

  7. For what types of investments is the payout ratio the most relevant?

  8. Mike is a highly compensated employee of XYZ Company, his company has offered him a nonqualified retirement ...

  9. What are some types of financial netting?

  10. If I owned stock that split last year, how does this affect my taxes?

  11. If ABC Company had the following Income Statement figures, what is the Operating Margin of ABC Company

  12. Janet Spears is planning to retire in 7 years and plans to start saving $15,000 ...

  13. How can a company buy back shares to fend off a hostile takeover?

  14. Why would a stock that pays a large, consistent dividend have less price volatility in the market than a stock that doesn't pay dividends?

  15. You observe the following exchange rates in the following markets ...

  16. How can the current ratio be misinterpreted by investors?

  17. A person purchases stock XYZ (an Over The Counter stock) from a company who is also the market maker ...

  18. Why do share prices fall after a company has a secondary offering?

  19. What is the difference between a primary and secondary financial market?

  20. What is a "wash sale"?

RELATED FAQS

  1. How do I use the PEG (price to earnings growth) ratio to determine whether a stock ...

    Using the PEG, or price/earnings to growth, ratio provides a better picture of a stock's valuation versus simply relying ...
  2. Which of the following is a horizontal spread? a) Buy 1 FBN Aug 50 Call; Long 1 ...

    The correct answer is c. A horizontal spread is also called a time spread or a calendar spread. The terms of the two contracts ...
  3. What is the difference between a long position and a call option?

    Learn what a long position in a stock is, what a call option is, and the difference between owning shares of a company and ...
  4. If a country's currency is determined by the strength of its economy, why isn't the ...

    Generally speaking, when Country A's currency is worth more than that of Country B, it does not necessarily mean that Country ...
  5. Why would my stock's value decline despite good news being released?

    More often than not, when a firm releases an earnings report the market will react to this news by adjusting the firm's stock ...
  6. If ABC corporation, which is listed on the New York Stock Exchange ...

    The correct answer is d). This transaction would qualify under two different exemptions – the first because it is an exchange ...
RELATED TERMS
  1. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends ...
  2. At The Money

    A situation where an option's strike price is identical to the ...
  3. Loyalty Program

    A rewards program offered by a company to customers who frequently ...
  4. Specific-Shares Method

    A personal financial accounting method that, when used properly, ...
  5. Parallel Loan

    A type of foreign exchange loan agreement that was a precursor ...
  6. Duty Of Loyalty

    A director's responsibility to act at all times in the best interests ...
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center