When is disclosure not enough in CFA Ethics?
I keep choosing answers that say "disclose it," but sometimes the correct answer wants consent or no trading. How do I separate those cases?
Ask what the problem is. Disclosure helps clients and employers evaluate conflicts, but it does not cure every issue.
If the issue is a conflict of interest, full and fair disclosure may be part of the fix. If the issue is outside compensation that could affect independence or loyalty, consent may be required. If the issue is material nonpublic information, disclosure to a client is not a green light to trade; the member should avoid acting on the information and follow compliance procedures.
The shorthand is:
- Conflict: disclose clearly.
- Outside compensation or competing duty: look for consent.
- Material nonpublic information: do not trade or cause trading.
- Misleading communication: correct the statement, not merely disclose that it might be wrong.
Master Level I with our CFA Course
107 lessons · 200+ hours· Expert instruction
Related Questions
Why is my allocation effect NEGATIVE for a sector that had positive returns?
How do I identify the OPTIMAL sector decision in a Brinson attribution table?
What is the difference between Brinson-Hood-Beebower and Brinson-Fachler? Which is on the exam?
Why does the trust pay tax on income instead of the beneficiary?
How bad are the compressed trust tax brackets really? Show me the dollars.
Join the Discussion
Ask questions and get expert answers.