Understanding Conflicts of Interest: Ethical Standards Guide
School
York University**We aren't endorsed by this school
Course
ACC 4502
Subject
Management
Date
Dec 11, 2024
Pages
6
Uploaded by SargentAardvark4167
1Ethical and Professional StandardsStandard VI:Conflicts of Interest© Kaplan, Inc.Standard VI(A) – Disclosure of ConflictsMake full, fair disclosure of all matters that could reasonably be expected to impair independence/objectivity, or interfere with duties to clients, prospects, or employerEnsure disclosures are prominent, delivered in plain language88Standard VI: Conflicts of Interest
2© Kaplan, Inc.GuidanceDisclose to clients:All matters that could impair objectivity—allow clients to judge motives, biasesFor example, between member or firm and issuer, investment banking relations, broker/dealer market-making activities, significant stock ownership, board service89Standard VI: Conflicts of InterestStandard VI(A) – Disclosure of Conflicts© Kaplan, Inc.GuidanceDisclose to employers:Conflicts of interest—ownership of stock analyzed/recommended, board participation, financial and other pressures that may influence decisionsAlso covers conflicts that could be damaging to employer’s business90Standard VI: Conflicts of InterestStandard VI(A) – Disclosure of Conflicts
3© Kaplan, Inc.Recommended ProceduresDisclose compensation arrangements with employer that conflict with clients’ interestsIf firm does not permit disclosure, consider dissociating from the activityFirms are encouraged to include compensation information in promotional materials91Standard VI: Conflicts of InterestStandard VI(A) – Disclosure of Conflicts© Kaplan, Inc.Investment transactions for clients and employers must have priority over transactions in which a member or candidate is the beneficial ownerDo not use knowledge of pending trades for personal gainStandard VI(B) – Priority of Transactions92Standard VI: Conflicts of Interest
4© Kaplan, Inc.Guidance“Beneficial owner”—has direct/indirect personal interest in the securitiesClient, employer transactions take priority over personal transactions (including beneficial ownership)Family member accounts that are client accounts must be treated as other client accounts93Standard VI: Conflicts of InterestStandard VI(B) –Priority of Transactions© Kaplan, Inc.Recommended ProceduresFirm’s compliance procedures should:Limit participation in equity IPOsRestrict purchase of securities through private placements94Standard VI: Conflicts of InterestStandard VI(B) –Priority of Transactions
5© Kaplan, Inc.Recommended Procedures Establish blackout/restricted periodsEstablish reporting procedures and prior clearance requirementsDisclose policies on personal investing to clients, upon request95Standard VI: Conflicts of InterestStandard VI(B) –Priority of Transactions© Kaplan, Inc.Disclose to employer, clients, and prospective clients, as appropriate, any compensation, consideration, benefit received from, or paid to, others for the recommendation of products or servicesStandard VI(C) – Referral Fees96Standard VI: Conflicts of Interest
6© Kaplan, Inc.GuidanceDisclosure allows clients and employers to evaluate full cost of service and any potential biasesDisclosure is to be made prior to entering into any formal agreement for servicesDisclose the nature of the consideration97Standard VI: Conflicts of InterestStandard VI(C) – Referral Fees© Kaplan, Inc.GuidanceEncourage firm to have clear policy regarding referral compensationFirms that do not prohibit should have clear approval processMembers should update referral compensation disclosure to employer at least quarterly98Standard VI: Conflicts of InterestStandard VI(C) – Referral Fees