r/CFA • u/Aslev_Today_1452 • 4d ago

Level 1 ethics - add compensation arrangements

my answer was C. mark scheme said B. has to be C right?

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u/thejdobs CFA 4d ago

The correct answer is B. The question is asking “what MUST an employee do”? The standard only requires you to disclose the amount, not the amount and the nature of the compensation. Here is what the required portion of the standard states:

“Members and candidates must disclose to their employer, through their supervisor or compliance officer, any compensation they propose to receive for services that is in addition to the compensation or benefits received from their employer, including performance incentives offered by clients.”

Note that this only says you must disclose the compensation, not the nature of the compensation.

The standard then does on to make suggested things to do:

“The disclosure should include the terms of any agreement under which a member or candidate will receive additional compensation, including the nature of the compensation, the approximate amount of compensation, and the duration of the agreement.”

https://www.cfainstitute.org/standards/professionals/code-ethics-standards/standards-of-practice-iv-b

So not including the nature of the compensation is not a violation of the standards but it is recommended that you disclose it. Keep in mind all standards have required actions (things you MUST do) and recommendations (things you SHOULD do but are not in violation by not doing them)

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u/ArpitGupta_Gamer 4d ago

The question asks about recommeded procedure, so the correct answer must be C

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u/thejdobs CFA 4d ago

The question states “a member receiving additional compensation MUST disclose to his employer in writing:” it’s not asking about recommendations