Cases Standard III

1. After providing client account investment performance to the external-facing

departments but prior to it being finalized for release to clients, Teresa Nguyen, an
investment performance analyst, notices the reporting system missed a trade. Correcting
the omission resulted in a large loss for a client that had previously placed the firm on
“watch” for potential termination owing to underperformance in prior periods. Nguyen
knows this news is unpleasant but informs the appropriate individuals that the report
needs to be updated before releasing it to the client.

2. Jenpin Weng uses e-mail to issue a new recommendation to all his clients. He then
calls his three largest institutional clients to discuss the recommendation in detail.

3. Louis Perkowski manages a high-income mutual fund. He purchases zero-dividend

stock in a financial services company because he believes the stock is undervalued and is
in a potential growth industry, which makes it an attractive investment.

4. Kyle Taylor of Taylor Trust Company, noting the performance of Taylor’s common
trust fund for the past two years, states in a brochure sent to his potential clients, “You
can expect steady 25% annual compound growth of the value of your investments over
the year.” Taylor Trust’s common trust fund did increase at the rate of 25% per year for
the past year, which mirrored the increase of the entire market. The fund has never
averaged that growth for more than one year, however, and the average rate of growth of
all of its trust accounts for five years is 5% per year.

5. David Bradford manages money for a family-owned real estate development

corporation. He also manages the individual portfolios of several of the family members
and officers of the corporation, including the chief financial officer (CFO). Based on the
financial records of the corporation and some questionable practices of the CFO that
Bradford has observed, Bradford believes that the CFO is embezzling money from the
corporation and putting it into his personal investment account.

6. Government officials approach Casey Samuel, the portfolio manager for Garcia
Company’s pension plan, to examine pension fund records. They tell her that Garcia’s
corporate tax returns are being audited and the pension fund is being reviewed. Two days
earlier, Samuel had learned in a regular investment review with Garcia officers that
potentially excessive and improper charges were being made to the pension plan by
Garcia. Samuel consults her employer’s general counsel and is advised that Garcia has
probably violated tax and fiduciary regulations and laws.