The Glenarm Company Case Report
The Glenarm Company case study is based on Peter Sherman, CFA holder, and the ethical implications involved with his move from Pearl Investment Management to the Glenarm Company for a new position. This is Sherman’s last week working at Pearl for 5 years as a junior research analyst before he moves to his new employer Glenarm as a portfolio manager. The past history of the Glenarm Company regarding ethical problems has set the circumstances (which can be viewed as ethically dubious) to allow the opportunity for Sherman to switch firms. This switch has then also given Sherman the opportunity and incentive to perform illegal and immoral actions that can help or hinder either of these firms. Another individual of interest is John Lawrence, CFA, who works at Glenarm Company. He has acted questionably in a moral sense if not necessarily in a legal one, and his actions should not be overlooked given the fact that he is a CFA charterholder and is supposed to uphold fair and ethical practices in the finance world. Certain policies should have been enforced by both firms that would have encouraged more ethical practices that would not have caused any conflicts of interest between employers, employees or their clients. Ethical and Standard Violations
Peter Sherman has been looking to increase Glenarm Company’s client base by contacting clients that are associated with Pearl. He goes about this in a number of ways, and his actions breach the guidance for standards set by the CFA Institute. Sherman is contacting active Pearl clients outside of business hours through “social calls”, enticing them to switch their accounts to be handled by Glenarm after he leaves Pearl. It is already unethical that he is calling them outside of business hours to conduct “business”, and they are actions that are considered violations in Standard IV - Duties to Employers. For example, “Solicitation of employer’s clients prior to cessation of employment; self-dealing; and misappropriation of clients or client lists” (CFA Institute, 2011, p. 92) are clear violations under Standard IV (A): Leaving an Employer. This section deals with an employee leaving his or her employer states that when an individual is leaving or planning to leave their current firm, their loyalty must still remain with the current employer until their departure is final and effective. As stated, “Standard IV (A) requires members and candidates to protect the interests their firm by refraining from any conduct would that would injure the firm, deprive it of profit, or deprive it of the member’s or candidate's skills and ability.” As a current employer at Pearl, Sherman is violating Standard IV - Duties to Employers (A) by acting in the interest of his soon to be employer Glenarm while Sherman is still an employee at Pearl. Whether clients associated with Pearl were active, just potential, or even rejected, it is equally unethical for Sherman to solicit any of them because he is using the firm’s resources to contact them. Furthermore, he is knowingly and willingly being unethical about his actions. This is seen by the fact that he told the clients he is trying to solicit to switch to Glenarm only after his own departure from Pearl, so as to hide his intentions from his employers at Pearl and cover himself. John Lawrence and the Glenarm Company are also at fault here, because they have encouraged this behaviour by Sherman in the form of a kind of bribe. Sherman is promised financial compensation based on the number of clients he is able to take from Pearl and bring over to Glenarm. Sherman on the other hand has violated Standard IV(B). “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…” (CFA Institute, 2011, p. 99). Here,...
Cited: CFA Institute. (2011). Guidance for Standards I-VII. CFA Institute.
Holden, G. A. (n.d.). The Glenarm Company. Capitol Life Insurance Company.
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