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Answer: Yes, Hostettler violated the Standards by failing to disclose the arrangement to both existing and prospective clients.
According to **Standard VI (C) - Referral Fees**, members must disclose to clients and prospective clients any referral arrangements, including those involving no monetary exchange (e.g., reciprocal referrals). Hostettler's failure to disclose the bilateral referral arrangement to both existing and prospective clients constitutes a violation of the Standards. This underscores the importance of transparency in professional relationships to maintain trust and integrity.
Author: LeetQuiz Editorial Team
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Hannah Hostettler, CFA, a portfolio manager at a wealth management firm, has a reciprocal referral arrangement with a lawyer where no fees are exchanged. Hostettler does not disclose this arrangement to her existing or prospective clients. Which of the following most accurately describes whether Hostettler violated the CFA Institute Standards of Professional Conduct?
A
No, Hostettler did not violate the Standards.
B
Yes, Hostettler violated the Standards by failing to disclose the arrangement to existing clients only.
C
Yes, Hostettler violated the Standards by failing to disclose the arrangement to both existing and prospective clients.
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