Disclose outside compensation before it distorts duties

Learning goals

• Which action best addresses the central case issues?
• Explain why an incentive to favor one account or alter risk applies to this case.
• Identify the case-specific assumption or failure mode before taking action.

Draft · approximately 30 minutes, excluding further revision.

Shared case and decision context

A client offers a portfolio manager a personal bonus if its account beats a target. The arrangement may conflict with the employer’s interests. The manager has not obtained written consent and considers copying employer research files before moving to a competitor. A supervisor notices repeated policy breaches.

Economic or professional mechanism

Outside compensation can create incentives to favor one account or take inconsistent risk. Obtain the required written consent from relevant parties before accepting arrangements that may conflict with employer interests. Loyalty does not mean obeying unethical instructions; it does require respecting legitimate employer property and duties.

Apply, challenge and communicate

Disclose the bonus terms and secure appropriate written consent before proceeding. Do not take confidential employer research without permission when leaving. A supervisor must investigate credible warning signs and implement reasonable controls; simply circulating a policy after repeated breaches is not an adequate response.

Formula and assumptions

Identify compensation conflicts; written consent before acceptance; protect employer property

Case analysis with explicit assumptions

1. A client offers a portfolio manager a personal bonus if its account beats a target. The arrangement may conflict with the employer’s interests. The manager has not obtained written consent and considers copying employer research files before moving to a competitor. A supervisor notices repeated policy breaches.
2. Method: Identify compensation conflicts; written consent before acceptance; protect employer property
3. Case result: Disclose the arrangement and obtain required written consent. Disclose the bonus terms and secure appropriate written consent before proceeding. Do not take confidential employer research without permission when leaving. A supervisor must investigate credible warning signs and implement reasonable controls; simply circulating a policy after repeated breaches is not an adequate response.

Errors to catch

• Do not replace the stated assumptions with an unstated shortcut. Reconcile units, timing and the claim being valued or duty being assessed.
• Only repeat a slogan is not a defensible conclusion for these case facts.

Original knowledge check

Answer every question before checking. Review explanations after submitting; retry starts a new attempt.

Sources and coverage status

These original lessons are drafts. Public outlines are used to check scope; the official learning-outcome text and proprietary question banks are not reproduced here. Follow the source for exam-year requirements and updates.

• Reference · www.cfainstitute.org
• Reference · www.cfainstitute.org