Reading - 2-I - LOS a: Q16-Q20

16、The Standards of Professional Conduct explicitly outlines responsibilities to four groups. Which of the following is NOT a group mentioned in that list?

A)   The profession.

B)   Employers.

C)   The investing public.

D)   The Federal Reserve.

The correct answer was  D)  

The Standards explicitly mention responsibilities to the profession, employers, clients, prospects, and the investing public. The Federal Reserve is not mentioned.

17、For an employee with the CFA designation who works for a firm, which of the following is NOT necessary to meet the requirements of the Code and Standards?

A)   It is recommended that their employer is aware of the Code and Standards.

B)   Recommend notifying their employer of their responsibility to follow the Code and Standards.

C)   Recommended that their immediate supervisor is aware of the Code and Standards.

D)   Deliver a copy of the Code and Standards to their employer.

The correct answer was  D)

It is no longer required but recommended that CFA members and candidates notify their employer that they are required to follow the Code and Standards.

18、A U.S. Congressional oversight committee has concluded that investment company fees should be detailed in dollar terms each quarter and has proposed the enactment of new legislation to this end. Currently, the legal requirement is to report such data annually. In compliance with current legal requirements, Dolphin investments, a Florida-based investment firm, reports annually. Eun Shin, CFA and employee of Dolphin, learns of the proposed changes but does not convert Dolphin's reporting to a quarterly basis. This action:

A)   constitutes professional misconduct as defined in the Code and Standards.

B)   is a violation of his duty to employer as defined in the Code and Standards.

C)   is a violation of his responsibilities as a supervisor as defined in the Code and Standards.

D)   is not a violation of the Code and Standards.

The correct answer was  D)

The quarterly fee presentation is only a proposal at this stage. There is no violation if Eun is following the regulations currently in force.

19、Which of the following is a CORRECT statement of a member's duty under the Code and Standards?

A)   A member is required to comply only with applicable local laws, rules, regulations, or customs even though the CFA Institute code and Standards may impose a higher degree of responsibility or a higher duty on the member.

B)   A member who trades securities in a foreign securities market where no applicable local laws or stock exchange rules regulate the use of material nonpublic information may take investment action based on this information.

C)   A member who trades securities in a country with less strict laws, rules, regulations, or customs may follow those laws if he discloses this information to his client.

D)   In the absence of specific applicable law or other regulatory requirements, the Code and Standards govern the member's actions.

The correct answer was  D)

Members are always, at a minimum, subject to the Code and Standards.

20、Sometimes a CFA Institute member simply feels a law has been violated by his firm, and sometimes the member knows a law has been violated. Which of the following pairs of guidelines is CORRECT with respect to the first step a member should take in each case? The member should first contact:

A)   the firm's counsel if he feels a law has been violated and contact his supervisor if he knows a law has been violated.

B)   his supervisor in the firm if he feels a law has been violated and contact the firm's counsel if he knows a law has been violated.

C)   the SEC if he feels a law has been violated and contact the firm's counsel if he knows a law has been violated.

D)   the firm's counsel if he feels a law has been violated and the SEC if he knows a law has been violated.

The correct answer was  A)

Standard I(A) says that when a member feels a law has been broken, the member should seek advice from the firm’s counsel. If the member feels the advice is unbiased and competent, the member should follow it. If the member knows a law has been violated, the member should contact a supervisor.