CFA Institute

FAF NewsletterSource: Financial Analysts Journal, Vol. 33, No. 6 (Nov. - Dec., 1977), pp. 78-80Published by: CFA InstituteStable URL: http://www.jstor.org/stable/4478089 .

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FAF Newsletter Mildred M. Hermann, Editor

L.A. Site Of March 1978 A High Technology seminar will be held for the first time March 6-8, 1978 at the Cen- High Technology tury Plaza Hotel, Los Angeles. The seminar, sponsored cooperatively by the FAF and

Seminar the Los Angeles Society of Financial Analysts, will examine the present state of U.S. technology, major trends, and the impact of trends on technology and other industries. Special attention will be given to five industry subsets-computers, communications, instrumentation, semiconductor, and aerospace. General sessions will feature new tech- nologies, emerging foreign competition, and techniques for successfully investing in technology on both short-and long-term bases. Breakfast meetings will be held with rep- resentatives of technology and technology-related companies. The registration fee will be $150. Hotel accommodations and field trip participation will be additional. For in- formation, call or write the Financial Analysts Federation, 219 East 42 Street, New York, N.Y., 10017, 212-557-0053.

News In Brief The Los Angeles Society of Financial Analysts has set up an "Accounting Hotline" on which members of the society may call any of five C.PAs with questions ... Theodore R. Lilley, C.EA., FAF President, will replace David Norr, C.EA., C.PA. on the FASB's Emerging Issues screening committee... Juniors who became members of so- cieties on or before June 30, 1976 will not have to pass C.FA. I to become Fellows. They gained an extension of two years and three months (from April 28, 1974-June 30, 1976) when the delegates voted October 5, 1977 to change the deadline date.

Railroad Disclosure An ad hoc committee composed largely of members of the Railroad Industry Subcom- Guidelines Paper Filed mittee of the Corporate Information Committee, but including two representatives of

the Financial Accounting Policy Committee, responded to the SEC's request for com- ment upon proposed guidelines for railroad industry disclosure, deferred maintenance, and betterment accounting. A minority view signed by the two FAPC members and dis- senting from the betterment accounting position taken by the ad hoc committee was ap- pended to the response.

Who We Are: What We Do

The Federation has developed a small folder which is a thumbnail sketch of the Federation and its activities, which include education of members, speaking out for the profession on questions of public policy, and pro- viding and enforcing a code of ethics and standards of professional conduct for members.

As a way of informing employers and of saying "thank you" for the

work analysts are doing on behalf of local societies and the Federation, our chairman, Solon P. Patterson, has sent to the chief executive of each firm employing two or more analysts a copy of the folder on the Federation and of the Code of Ethics and Stan- dards of Professional Conduct which apply to members.

Analysts are encouraged to discuss the code and standards with their em-

ployers and to seek clarification, if it is needed, by calling me at any time. Your suggestions about possible amendments to the code or standards would also be appreciated.

Additional copies of the folder are available from the secretary of the Federation.

-Theodore R. Lilley, C.F.A. FAF President

78 O FINANCIAL ANALYSTS JOURNAL / NOVEMBER-DECEMBER 1977

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Coal/Energy: Richmond Coal-the Frustrated Energy Savior will be the topic of a November 7-8 seminar at the Seminar Subject Richmond, Va., Hyatt House. Co-sponsored by the Richmond Society of Financial

Analysts and the FAF, the seminar deals with such topics as the nuances of coal, the future of the United Mine Workers union, metallurgical coal, coal conversion realities, coal technology, and the role of the railroads in meeting coal demand patterns.

Accounting Update In the two months since publication of the last Newsletter, the Financial Accounting Standards Board:

Named Donald J. Kirk its chairman, effective January 1, 1978. A member of the stan- dards board since 1973, Mr. Kirk, 44, was a partner of Price Waterhouse & Co. Issued FASB Interpretation No. 19-Lessee Guarantee of the Residual Value of Leased Property, an interpretation of FASB Statement No. 13. Exposed a draft of a proposed statement on Financial Reporting for Segments of a Business Enterprise-Interim Financial Statements, an interpretation of FASB State- ment No. 14. Announced a research study on the objectives and basic concepts underlying financial accounting and reporting for not-for-profit entities. The study will be conducted by Robert N. Anthony of Harvard Graduate School of Business Administration.

During the same time period, the FAF's Financial Accounting Policy Committee:

Responded to two FASB exposure drafts of proposed financial accounting stan- dards-one on Accounting and Reporting by Defined Benefit Pension Plans, and the other on Accounting and Reporting by Oil and Gas Producing Companies. Submitted a position to the Securities and Exchange Commission on its release on In- dustry and Homogeneous Geographic Segment Reporting.

Discussion of these and other accounting matters is found in the Financial Analysts Journal column "Accounting for Financial Analysis." Copies of the FAPC submissions are available from the FAF Secretary, 219 East 42 Street, New York, N.Y. 10017.

1978 Membership Sale copies of the FAF's 1978 Membership Directory will be available about December Directory Available 1, 1977 at a cost of $50. (Members of FAF affiliated societies each receive one copy of

the Directory as part of their dues allocation.) A Classified Supplement to the Direc- tory, listing analysts by name by industry or functional specialty will also be available at a price of $35 per copy.

Future Dates h November 6-9 - Pension Management Workshop, Williamsburg > November 7-8 - Coal Seminar, Richmond > November 10 - All Day Seminar - Should all non-Canadian investments be in the

U.S. market? Montreal > November 28 - Investment Theory, San Francisco

1978 h February 5-7 - Energy Seminar, Houston h March 6-8 - High Technology Seminar, Los Angeles > March 29-30 - Banking Symposium, New York > May 7-10 - Annual Conference, Miami Beach > June 7-8 - Insurance, New York > June 12-13 - Forest Products Seminar, Seattle > June 21-22 - Government, Washington, D.C. > July 23-28 - Investment Management Workshop, Dartmouth College, NI.H > August 13-19 - Financial Analysts Seminar, Rockford College, Ill.

FINANCIAL ANALYSTS JOURNAL / NOVEMBER-DECEMBER 1977 O 79

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NOTICES of

Disciplinary Sanctions on FAF Fellows, Oct. 5, 1977

I

The Board of Directors of The Financial Analysts Federation, on October 5, 1977, imposed the sanction of private admonish- ment on a Fellow of the FAF pursuant to a Stipulation with that member.

The Board of Trustees of the Institute of Chartered Financial Analysts, on September 16, 1977, also imposed private admon- ishment on the same member, who is also a Chartered Financial Analyst, pursuant to an identical Stipulation. These Stipulations resulted from cooperative proceedings by the FAF and ICFA in- volving this joint member pursuant to the By-Laws of each or- ganization.

The complaint against the member was that he violated Stan- dards A-1 and D of the FAF Standards of Professional Con- duct, which provide as follows:

A. Compliance With Governing Laws and Regulations. 1. . ..The financial analyst shall also comply strictly with applicable rules and regulations of the stock exchanges and of the National Association of Securities Dealers if he, or his employer, is a member of these organizations.

D. Disclosure of Conflicts. The financial analyst, when making investment recommen- dations, or taking investment actions, shall disclose to his customers, clients, and employer any material conflict of in- terest relating to him and any material beneficial ownership of the securities involved which could reasonably be ex- pected to impair his ability to render unbiased and objective advice. The financial analyst shall also comply with all requirements as to disclosure of conflicts of interest imposed by law and by rules and regulations of organizations govern- ing his activities and shall comply with any prohibitions on his activities if a conflict of interest exists.

The complaint alleged that the member violated Standards A- 1 and D by preparing a research report which was distributed to local customers which did not disclose the market making ac- tivity of such member's firm although he was aware of the activi- ty and the requirement for disclosure.

The joint member agreed to the sanction imposed by the FAF and to this Notice.

II

The Board of Directors of The Financial Analysts Federation, on October 5, 1977, imposed the sanction of private censure on a Fellow of the FAF pursuant to a Stipulation with that member.

The complaint against the member was that he violated Stan- dards A- 1 and D of the FAF Standards of Professional Con- duct.... (The Standards are quoted above in the Notice of Sanction on a Joint Member.)

The complaint alleged that the member violated Standards

A- 1 and D as a supervisory analyst by preparing and signing 12 research reports which were distributed to the public including recommendations of 3 securities in which his firm was making a market. None of the reports disclosed this market making activi- ty although the member was aware of such activity and had been previously apprised of such disclosure requirement.

The member agreed to the sanction imposed by the FAF and to this Notice.

III The Board of Directors of The Financial Analysts Federation,

on October 5, 1977, imposed the sanction of private censure on a Fellow of the FAF pursuant to a Stipulation with that member.

The complaint against the member was that he violated Stan- dards A-1, B- 1, B-2, and B-4 of the FAF Standards of Profes- sional Conduct, which provide as follows:

A. Compliance With Governing Laws and Regulations. 1. The financial analyst shall have and maintain knowledge of and shall comply strictly with all applicable federal, state, and provincial laws as well as all applicable rules and regula- tions of any governmental agency governing his activities ...

B. In vestment Recommendations and Actions. 1. The financial analyst shall have a reasonable and ade- quate basis for investment recommendation and action. He shall maintain appropriate records to support the reason- ableness of such recomnmendation and action. He shall dis- tinguish between facts and opinions in the presentation of in- vestment recommendations. 2. The financial analyst, in making an investment recom- mendation or taking investment action, shall exercise dili- gence and thoroughness in the analysis of relevant invest- ment risks and the valuation of, or the expected return from, investment securities. Any such recommendation or action shall be supported by appropriate research and investigation. 4. The financial analyst shall scrupulously avoid any state- ments, oral or written, which guarantee any investmnent.

The complaint alleged that the member violated Standards A- 1, B- 1, B-2, and B-4 by willfully violating and willfully abet- ting violations of the anti-fraud provisions of the federal securi- ties laws in his capacity as an officer of a registered broker- dealer. In particular, it was asserted that the member, involved in the distribution of public offerings of oil and gas interests, in- adequately investigated various representations of the issuer and thus failed to discover in timely fashion violations of Regulation B by the issuer. The violations eventually became known to the member, who brought them to the attention of the SEC. Among the violations of Regulation B were the selling of interests after the expiration of the exemption period, the use of unregistered sales literature, and misrepresentation of the activities and fi- nancial position of the offering company.

The member agreed to the sanction imposed by the FAF and to this Notice.

80 W FINANCIAL ANALYSTS JOURNAL / NOVEMBER-DECEMBER 1977

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