"morality" exercise:Guidance

C is correct because there is no indication Mbuwanga’s recommendation is based on any compensation package based on sales targets as being part of the sales team. If he had a sales target as part of his responsibility to promote the new product, it could be conceived his independence and objectively was in question. Mbuwanga does however seem to be in violation of Standard III(C)–Suitability in that while research with regard to correlation was undertaken, an analysis based on each individual client’s return and risk objectives was not done. He may also be in violation of Standard I(A)–Knowledge of Law in that he would need to determine if the Kenyan REIT product is allowable in each of the countries where his clients reside.

A is incorrect because while research with regard to correlation was undertaken, an analysis based on each individual clients’ return and risk objectives was not done.

B is incorrect as the new REIT products are being recommended to all clients based on new regulations introduced in Kenya. Mbuwanga may be in violation of Standard I(A)– Knowledge of the Law depending on the rules and regulations in each of the African countries where his clients reside if those regulations do not allow investments outside of the country and/or in this investment type.

A is correct because golf equipment is a business independent of the financial services industry such that any board obligations would not likely be considered a conflict of interest requiring disclosure according to Standard IV(B)–Additional Compensation Arrangements. Standard IV(B) requires members and candidates to obtain permission from their employer before accepting compensation or other benefits from third parties for the services that might create a conflict with their employer’s interests. Managing investments for family and non-family members could likely create a conflict of interest for Younis’ employer and should be disclosed to his employer.

B is incorrect, as Younis should have made full and fair disclosure of all matters that could reasonably be expected to impair his independence and objectivity or interfere with his respective duties to his clients, prospective clients, and employer as required by Standard VI(A)–Disclosure of Conflicts. Since the majority of his time is now spent on fund management, in potential competition with his employer, he would need to disclose this. Disclosure of the outside work should also have been made at the time of employment so that his employer was fully aware of these activities and could make their own judgment on whether or not these activities impaired the broker’s ability to complete his responsibilities at the financial services organization.

C is incorrect, as Younis should have made full and fair disclosure of all matters that could reasonably be expected to impair his independence and objectivity or interfere with his respective duties to his clients, prospective clients, and employer as required by Standard VI(A)–Disclosure of Conflicts. Since the majority of his time is now spent on fund management, in potential competition with his employer, he would need to disclose this. Disclosure of the outside work should also have been made at the time of employment so that his employer was fully aware of these activities and could make their own judgment on whether or not these activities impaired the broker’s ability to complete his responsibilities at the financial services organization.