Chartered Alternative Investment Analyst Association (CAIA) Practice Exam

According to CFA Institute Standards of Professional Conduct, what is true regarding Pennington and the helicopter ride?

1. He may accept the helicopter ride.

2. He cannot accept the helicopter ride.

3. He is required to report the offer.

4. He must discuss the offer with his supervisor.

The correct answer is: He cannot accept the helicopter ride.

The correct response regarding Pennington and the helicopter ride is that he cannot accept the helicopter ride. This situation hinges on the CFA Institute's Standards of Professional Conduct, specifically related to the principles governing conflicts of interest and the acceptance of gifts or benefits that could influence a professional's judgment. In many cases, accepting gifts or benefits such as a helicopter ride from a client or business partner can create a conflict of interest or the appearance of a conflict. This is because it may compromise the professional's obligation to act in the best interest of their clients or to provide impartial financial advice. The Standards emphasize the importance of maintaining independence and avoiding situations where one’s objectivity could be undermined. Therefore, as a general rule, such offers should be declined to uphold integrity and professional standards. On the other hand, while it is advisable for professionals to report or discuss potential conflicts of interest with a supervisor, this is not necessarily an obligation unless specific policies or circumstances dictate such actions. The fact that the ride is considered a gift or benefit already establishes a clear guideline to decline it, reinforcing the importance of maintaining ethical standards in the field.