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Standard IV(B): Additional Compensation Arrangements

Posted on February 14, 2021February 14, 2021 by financialeducation

Members and Candidates must not accept gifts, benefits, compensation, or
consideration that competes with or might reasonably be expected to create
a conflict of interest with their employer’s interest unless they obtain written consent from all parties involved.

Guidance

Members must get written approval from their employer prior to accepting any compensation from third parties for services rendered to the employer or that may create a conflict of interest with the employer.

Compliance

Members should prepare a written report to their supervisor
and compliance officer specifying any additional compensation they propose to receive for their services. The details should be confirmed by the party offering the additional compensation, including performance incentives offered by clients. The report should state the terms of the agreement, such as the nature and amount of the compensation, and the duration of the agreement.

Application

The CFA Institute Standards of Practice Handbook provides several examples of potential violations related to additional compensation arrangements.

  • Failing to inform the employer of an arrangement granting use of a client’s resort condominium based on investment performance
  • Failing to disclose non-monetary compensation for serving on the board of a company in which the firm’s clients invest

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