Standard IV: Duties to Employers: practice question

Stellan Roth, a portfolio manager at Quantex Ridge Advisors, is invited to join the board of directors of a long-standing institutional client, a role that pays an annual retainer and grants restricted stock. Roth believes the post would deepen his industry knowledge. Under the Standards, before accepting the position Roth must:

1. Decline the invitation, because serving as a director of a client company is prohibited outright
2. Accept the role and disclose it to affected clients in the next quarterly report
3. Obtain written consent from his employer and disclose the arrangement to clients so they can weigh any conflict

Show answer and explanation

Correct answer: C

Explanation: C is correct: Standard IV(B) requires written employer consent before accepting additional compensation or a directorship that could conflict with the employer's interests, and Standard VI(A) separately requires disclosing the potential conflict to clients. A is incorrect because outside directorships are not categorically forbidden once the consent and disclosure obligations are met. B is incorrect because telling clients alone omits the employer consent that the Standards make mandatory.