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The following scenarios involve two analysts at Dupree Asset Management, a small New
York-based company with about $150 million in assets under management. Dupree restricts
personal trading of stocks analyzed, corporate directorships, trustee positions, and other
special relationships that could reasonably be considered a conflict of interest with their
responsibilities to their employer.
Ray Bolt, CFA, is a senior investment analyst. Bolt was recently elected to the board of
trustees of his alma mater, Midwest University, and was appointed as the chairman of
the University's endowment committee. Midwest has more than $2 billion in its
endowment. Bolt must travel from New York to Chicago eight times a year to attend
meetings of the board of trustees and endowment committee. Bolt did not inform
Dupree of his involvement with Midwest University.
Wanda Delvecco, a candidate in the CFA Program, is a junior investment analyst. She
recently wrote a research report on Aveco Communications and recommended the
stock for Dupree's "buy" list. Delvecco bought 200 shares of Aveco stock for her
personal account 12 months before she wrote her research report. Over the past 12
months, the stock's price has been in the $20-42 price range. Delvecco has not
informed Dupree of her ownership of Aveco stock.
According to CFA Institute Standards of Professional Conduct, which the following
statements about Bolt and Delvecco's actions is CORRECT?
A) Delvecco violated the Standards, but Bolt did not.
B) Both Bolt and Delvecco violated the Standards.
C) Neither Bolt nor Delvecco violated the Standards.
Joan Platt, CFA, operates an investment firm in New York, but maintains an office in Xania.
Platt's firm invests on its clients' behalf in both domestic and international stocks and bonds.
Platt's employees include two analysts, Paula Linstrom, CFA, and Hershel Wadel, a member
of the CFA Institute. Both analysts report to Platt directly. Thorvald Knudsen, CFA, manages
the international bond portfolio.
Xania recently established a stock market, which is not very efficient. None of the Xanian
stocks trade in the U.S. market. Xania legally permits the use of material inside information.
Platt believes that using inside information would help her compete against other Xanian
investment advisers, and also help some of her Xanian clients reach their investment
objectives.
Platt instructs Wadel to write a research report on Gamma Company. Wadel's wife inherited
500 shares of Gamma Company from her father when he died five years ago. Gamma stock
currently sells for $35 a share. Wadel does not believe that informing Platt about his wife's
inheritance is necessary.
Doris Black, one of Wadel's long-time clients, verbally promised Wadel that he could use her
vacation home in Aspen, Colo., for a week during skiing season if the return on her portfolio
exceeded its benchmark by two percentage points during the next year. Black also promised
to reimburse Wadel for his travel expenses. Because Wadel is the sole manager of Black's
portfolio, he says nothing to Platt about his arrangement with Black.
Platt instructs Linstrom to write a research report on Delta Enterprises. Delta's stock is
widely held by institutional and individual investors. Linstrom does not own any Delta
shares, though one of her friends owns 100 shares of Delta. Linstrom does not believe that
informing Platt about her friend's ownership of Delta shares is necessary.
Platt suspects that one of the firm's unpaid interns has violated a federal securities
regulation.