Question of the Week

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.


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.

Professionals FAQs
  1. Where can I look for a financial planner?

    References from trusted friends or family members can help you find a financial planner; however, keep in mind that your friends' financial situations and goals may differ from yours and, therefore, their planners won't necessarily be the best fit for you.The Certified Financial Planner (CFP) Board of Standards certifies financial planners and maintains an online list of certified financial planners on its CFP Board of Standards website.
  2. If I am looking to get an Investment Banking job. What education do employers prefer? MBA or CFA?

    If you are looking specifically for an investment banking position, an MBA may be marginally preferable over the CFA. The caveat here is that the MBA would most probably need to be from a Top-20 B-School.The Chartered Financial Analyst (CFA) is well worth considering if you (a) are aiming for an entry-level position in investment banking, and/or (b) cannot afford to shell out six figures for an MBA or have to settle for a lesser-known B-school.That's because in the investment banking field, most entry-level positions are at the analyst level.
  3. Can I still pass the CFA Level I if I do poorly in the ethics section?

    You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't count on it. The CFA Institute has long emphasized that ethics is a particular area of focus for it. The seriousness with which the CFA Institute views ethics is evident from the fact that for exam candidates with borderline total scores, performance on the ethics section can mean the difference between passing and failing the exam.
  4. Under the USA, registration as an IAR includes all of the following EXCEPT:

    Under the USA, registration as an IAR includes all of the following EXCEPT: A. Minimum net capitalB. Passing a qualification examC. Filing a consent to service of processD. Posting a surety bond The correct answer is "A", since only an IA would need to prove minimum net capital requirements.