CFA Ethics: A Case Study on Investment Advice and Pension Liabilities

This case study examines the ethical challenges faced by Harry Markham, a CFA charterholder working for Investment Consulting Associates (ICA), concerning the valuation of public sector pension fund liabilities. Markham discovers that the actual liabilities, when calculated using standard valuation and financial analysis principles, are significantly higher than those reported by the Government Accounting Standards Board (GASB). He is conflicted because his firm and clients are uninterested in addressing these discrepancies, while his professional duty as a CFA requires him to provide sound and ethical investment advice. The study presents two alternative courses of action: providing advice that aligns with the client's desires, thereby ignoring the identified liabilities, or offering advice based on the accurate but unfavorable assessment, adhering to the CFA Code of Ethics and Standards of Professional Conduct. The study concludes that Markham should choose the latter to uphold ethical principles and act in the public interest, even if it risks conflict with his firm and clients. The document is available on Desklib, a platform offering AI-based study tools and a wide range of academic resources for students.

Running head: ETHICS
Ethics
Name of the Student
Name of the University
Author Note

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ISSUE
The following are the primary issues which have been identified in the situation in which
Markham is into-
Firstly, it has been identified that Markham is a CFA who works for an Investment
consulting Associate which is a firm providing investment advice in relation to pension funds.
He has identified that there is a major concern in relation to the valuation of public sector
pension fund liabilities. This is because upon the valuation of liabilities through the use of
valuation and financial analysis principles the number which is obtained is almost double of what
has been actually reported. In addition there is a problem that the board does not want to listen to
the fact that the liabilities incurred by the funds are much more than what is depicted through the
actual figures of Government Accounting Standards Board (GASB). In addition he has the
knowledge that the firm for which he works want to satisfy the board of trustees. On the other
hand he has the liability of providing sound investment advice to the board of trustees and the
state legislature against those which are grossly misleading as per the CFA Code of Ethics and
Standards of Professional Conduct
Secondly, being a investment advisor it is his duty to understand the circumstances of the
client as a fundamental ethical precept. An advice should never be provided without knowing the
circumstances of the clients as per CFA professional standards. He needs to know before
providing the advice that the clients knows about shortage of funds before starting. In addition
the sponsors of the plan do not want to here a bad news and it is the profession al responsibility
of Markham to provide sound investment advice. Under the code he has the duty to act with
integrity, respect and diligence with the clients. He must also practice make others to practice the

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profession in an ethical manner. Although he has a duty of loyalty to the client and the employer
under part III A and IV A of the code he cannot compromise with ethics while being loyal.
Alternative 1
There are primarily two alternatives which are available in the given situation for Markham.
Firstly, he may provide the professional advice which the sponsors and the clients of the
firm seek. These advices have to be provided without taking into consideration the additional
liabilities which have been determined by Markham in relation to the funds and which may have
a significant impact on the program.
Significance
By providing this kind of advice he would be able to stay loyal to his firm and good to the clients
as this is what they want to here. However doing so which ensure that he is not acting legally and
ethically in relation to the situation.
Alternative 2
Secondly, he may let provide his advice based on the shortcomings which have been
identified by him in relation to the program. This advice would be totally in compliance with
CFA Code of Ethics and Standards of Professional Conduct as well as professional standards
(Vladu, 2016).
Significance
In the given situation he would be able to comply with the criteria provided through the
code of ethics. The code of ethics wants a CFA charterholder to work ethically in public interest,

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consider the circumstances of the clients while providing an advice and not indulge in any form
of advice which they believe to be misleading. If he is found to violate the code he may be
subjected to summary suspension. Although he has a duty of loyalty to the client and the
employer under part III A and IV A of the code he cannot compromise with ethics while being
loyal (Henderson et al., 2015).
Selection of alternatives
In the given situation Markham has to select the second alternative. This is because the
second alternative would ensure the compliance of the CFA with the professional code of
conduct and the professional standards. It is his duty to ensure that he is working in compliance
of ethical principles (Ferrell & Fraedrich, 2015). It is also his duty to ensure that he acts in public
interest or else he may be subjected to summary suspension which would be far worse than being
terminated by his firm.
My position
If I would have been in the same position as Markham I would have also taken the
second alternative in the situation. This is because I would not have compromised with the
ethical principals due to my own interest or the interest of the client because doing so would not
have been a correct approach in the situation.

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References
CFA Code of Ethics and Standards of Professional Conduct
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson
Education.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting.
Pearson Higher Education AU.
Vladu, A. B. (2016). Ethical attitudes of Romanian accountants: evidence from
practitioners. African Journal of Economic and Sustainable Development, 5(3), 266-286.