Ethical Considerations of Employer Compensation Plans

Medium Cfa Institute Code And Standards Employer Duties - Compensation

As a newly appointed portfolio manager at a registered investment advisory firm, you are reviewing the compensation plan that was proposed by your firm’s management. This plan offers performance bonuses based on the investment returns achieved by your clients. However, you notice that the bonuses also incentivize taking high levels of risk to achieve short-term performance metrics rather than focusing on the long-term welfare of your clients.

According to the CFA Institute Code of Ethics and Standards of Professional Conduct, how should you approach the situation regarding the compensation plan?

You should accept the plan as is, focusing only on maximizing your personal performance bonus.

You should raise concerns and suggest modifications to ensure that the compensation plan aligns with the best interests of your clients.

You should delay any decisions until management pressures you to comply with the existing plan.

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