Ethics Case Study of the Week: The New Hire

By Gary Sarkissian posted 09-12-2022 08:11

CFA Institute’s Code of Ethics and Standards of Professional Conduct outline the ethical guidelines for the investment profession that are critical to maintaining the integrity of capital markets and investor trust.  Members, candidates, and even firms make a commitment to uphold these standards as they help elevate ethical decision-making among industry participants.  

As investment professionals, we face important ethical decisions in our day-to-day activities.  Some scenarios we encounter will be straightforward, while others may be more complex.  No matter the circumstances, continuous learning remains imperative in an evolving investment industry and an adapting regulatory environment. 

For that reason, each week we feature a sample ethics case to help reinforce the code and standards.  Many cases are built upon real-life examples that may involve a regulatory matter or even a CFA Institute Professional Conduct investigation.  At the end of each case is a multiple-choice question that addresses the ethical nature of the actions taken in that case.  

The New Hire
Lisa Wong recently started a new role as a client portfolio manager at Lake Monroe Advisory (LMA), a registered investment advisor (RIA) that caters to high-net-worth business owners.  In addition, Wong is a CFA charterholder and passed all three levels of the CFA exam on the first attempt.

LMA’s marketing and sales manager, Diana Goss, met with Wong during her first week on the job to plan out her marketing strategy.  One of the objectives was to develop a biography for Wong that Goss could publish on LMA’s website and marketing brochures.  Goss’ initial draft of the biography included the following text about Wong:

“Lisa Wong is a CFA charterholder, and an exceptional one as well as she managed to pass each level of the CFA exam on the first attempt, thus making her most qualified to managing her clients’ money.”

The following day, Wong and her supervisor, Tyler Guthrie, who is a senior portfolio manager at LMA and is training Wong to take on some of his accounts, visited one of Guthrie’s clients.  In his introduction of Wong to his client, Guthrie stated the following:

“I would also like to mention that Lisa is a chartered financial analyst.  The CFA program signals a charterholder’s success in completing a rigorous and comprehensive study program in the field of investment management and research analysis.”

Upon returning to the office, Wong discovered an order form for her business cards on her desk.  In addition to being a CFA charterholder, Wong also holds an MBA and wanted to display that accomplishment next to her name on her business card.  Below is how she requested her name to be displayed on the business card:

“Lisa Wong, MBA, CFA”

Finally, Wong shared her social media handle with Goss so that Goss could tag Wong’s posts from LMA’s official social media account.  Below is Wong’s pseudonym and handle:

Pseudonym: The Lightning Trader CFA
Handle: @realLightningLisaCFA

Which of the following statements concerning this case is accurate?

 A. Goss’ description in Wong’s biography complies with the standards as long as it is true that Wong passed all levels of the CFA exam on the first attempt.
 B. Guthrie’s comment violated the standards because it made an unsubstantiated characterization of the CFA program.
 C. Wong violated the standards by not displaying “CFA” right after her name, and before “MBA,” on her business card.
 D. Wong’s social media pseudonym complies with the standards.
 E. None of the above.

What do you think is the correct choice?  The “Analysis” section below will walk through the reasoning and provide the correct answer.  Also, feel free to discuss in the comments below.  The completion of this case qualifies for 0.25 hour of Standards, Ethics, and Regulation (SER) credit.

This case deals with Standard VII(B) Reference to CFA Institute, the CFA Designation, and the CFA Program, which states that “[w]hen referring to CFA Institute, CFA Institute membership, the CFA designation, or candidacy in the CFA Program, Members and Candidates must not misrepresent or exaggerate the meaning or implications of membership in CFA Institute, holding the CFA designation, or candidacy in the CFA Program.”  In this case, there were a number of violations committed.

To begin with, members are able to state that they have passed all three levels of the CFA exam as long as that statement is true.  That being said, Goss’ description goes insofar as to linking that fact with Wong’s performance, which is a violation of the standards.   

Guthrie’s comment also violated the standards, but not because he mischaracterized the CFA program.  Indeed, Guthrie’s characterization of the CFA program signaling a “charterholders’ success in completing a rigorous and comprehensive study program” is permissible.  Where Guthrie’s statement was in violation was how he referred to Wong as being a “chartered financial analyst.”  Reference to the CFA designation must be expressed as an adjective versus as a noun (i.e., Wong is a CFA charterholder, not a CFA). 

The ordering of designations on a business card is a matter of personal preference.  If Wong chooses to display MBA before CFA, then that is her discretion.  In the context of social media, however, the standards explicitly state that “pseudonyms or online profile names created to hide a member’s identity should not be tagged with the CFA designation.”  Thus, Wong’s pseudonym for her social media account violates the standards

Because answer choices A through D do not correctly address the violations in this the case, the best answer is E.

This case was written by Gary Sarkissian, CFA.

Image by mohamed Hassan from Pixabay