Page 48 - FINAL CFA II SLIDES JUNE 2019 DAY 1

MODULE 3.1: READING 3: APPLICATION OF THE CODE & STANDARDS

ETHICS CASE STUDIES

LOS 3.a: Evaluate policies and practices for a firm and an individual in relation to the CFA Institute Code of Ethics and Standards of
Professional Conduct.

LOS 3.b: Explain the appropriate action to take in response to conduct that violates the CFA Institute Code of Ethics and Standards of
Professional Conduct.

Standard IV(B) Duties to Employer: Additional Compensation Arrangements
Cryptocurrencies compete with banks for transaction completion services. Stark’s mining of Meerine (even on his own computer) might
conflict with Eyearne Bank’s interest.
1
Violation/s:
• Failing to inform the employer before engaging in mining activities.

Action/s:
• Stark should disclose to a supervisor or compliance officer of his intent to mine Meerine, what his potential earnings would be from
this activity, and obtain a written permission before mining

Standard V(A) Investment Analysis, Recommendations, and Actions: Diligence and Reasonable Basis
Even though Stark has researched Meerine, this initial recommendation to the smallest clients is not grounded in reasonable basis.

Violation/s:
• Stark’s evaluation of cryptocurrencies and Meerine in particular was not thorough.

Action/s:
• Stark should document his research into Meerine, the drivers of its value, and clients for which it would be suitable.