Question #31 - Reading 42.2 Standards of Professional Conduct Guidance for Standards II

Reading: Reading 42.2 Standards of Professional Conduct Guidance for Standards II

PDF File: Reading 42.2 Standards of Professional Conduct Guidance for Standards II.pdf

Page: 18

Status: Unattempted

Correct Answer: A

Shared Context

- If Lance had disclosed material that was nonpublic information about the decline of sales of Mediplex and its effect on IMed's earnings, Cunningham would have been least likely to be obligated to do which of the following? A) Make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in a breach of duty. B) Inform the appropriate regulatory authority that Lance had violated securities laws. C) Not trade in shares of IMed.

Question

Dinners with Lance, Cunningham and Hunt at Cunningham's exclusive country club usually cost more than $200 per person. When he and Lance worked for the same broker-dealer and Hunt was a client, Cunningham has always paid the bill. Which Standard will Lance violate if he continues to allow Cunningham to pay for dinner?

Answer Choices:

A. Standard I(B), Independence and Objectivity

B. Standard IV(B), Additional Compensation Arrangements

C. Standard III(B), Fair Dealing

Explanation

Over the course of a year, Lance will have received gifts of more $2400 from Cunningham. Standard I(B), Independence and Objectivity, covers receipt of gifts from external parties that may try to influence members' professional actions to the possible detriment of Lance's employer, IMed, and the investing public. Even though Lance and Cunningham are long-time friends and former colleagues at Cunningham's employer, the potential for undue influence exists. Lance should be particularly concerned given Cunningham's inappropriate question regarding IMed's earnings. In determining how best to comply with Standard I(B), Lance should no longer permit Cunningham to pay for his dinner and, given the prestigious nature of the country club, should also consider moving the monthly dinner to a different venue to avoid the appearance of impropriety.

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