bmaggie

Mary White, CFA, sits on the board of directors of XYZ Manufacturing, Inc. She discovers that management has knowingly participated in an activity she knows is illegal. According to the CFA Institute Standards of Professional Conduct, White is required to:

A) disassociate herself from the activity.

B) seek legal advice to determine what actions should be taken.

C) both of these choices are correct.

bmaggie

Mary White, CFA, sits on the board of directors of XYZ Manufacturing, Inc. She discovers that management has knowingly participated in an activity she knows is illegal. According to the CFA Institute Standards of Professional Conduct, White is required to:

A) disassociate herself from the activity.

B) seek legal advice to determine what actions should be taken.

C) both of these choices are correct.

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Standard I(A), Knowledge of the Law. Prohibition against knowingly practicing or assisting in violation of laws, rules, and regulations. If White knows that someone has engaged in a possible illegal activity, she should: (1) report the finding to the appropriate supervisory person at her firm, (2) if the situation is not remedied, disassociate herself from the situation, and (3) seek legal advice to see what other actions, such as notifying the proper regulatory agency, should be taken.

bmaggie

If a CFA Institute member knows that a fellow employee has violated a law, according to Standard I(A) the member must NOT do which of the following?

A) Seek legal advice.

B) Report the employee violating the law to the appropriate supervisor in the firm.

C) Report the employee violating the law to the SEC.

bmaggie

If a CFA Institute member knows that a fellow employee has violated a law, according to Standard I(A) the member must NOT do which of the following?

A) Seek legal advice.

B) Report the employee violating the law to the appropriate supervisor in the firm.

C) Report the employee violating the law to the SEC.

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Standard I(A) does not require a CFA Institute member to report violations to governmental or regulatory agencies. The other answers are appropriate actions.

bmaggie

The SEC’s new stock-trading rule has just gone into effect. The SEC will give brokers a 10-day grace period, during which violators of the rule will be immediately notified and given a chance to remedy their situation to comply with the new rule. If a CFA Institute member unknowingly violates the rule and then remedies the situation within the 10-day grace period, has the member violated Standard I(A)?

A) No, because the member remedied the situation.

B) Yes, because the member did not maintain knowledge and know of the rule.

C) No, because the member unknowingly broke the rule.

bmaggie

The SEC’s new stock-trading rule has just gone into effect. The SEC will give brokers a 10-day grace period, during which violators of the rule will be immediately notified and given a chance to remedy their situation to comply with the new rule. If a CFA Institute member unknowingly violates the rule and then remedies the situation within the 10-day grace period, has the member violated Standard I(A)?

A) No, because the member remedied the situation.

B) Yes, because the member did not maintain knowledge and know of the rule.

C) No, because the member unknowingly broke the rule.

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Standard I(A) explicitly says that a member shall maintain knowledge and comply with laws, rules, and regulations. By not knowing of the rule, the member broke the standard. If a CFA Institute member accidentally breaks a rule from a careless error and remedies the situation, this would not be a violation of Standard I(A).

bmaggie

Mega Securities, a multinational investment advisor based in the United States, employs the following analysts who practice in multiple jurisdictions.

• Melissa Black, CFA, resides in Country N, which has no securities laws or regulations, but does business in Country L, which has securities laws and regulations that are less strict than the Code and Standards.
• Tom White, a CFA Institute member, resides in Country L, but does business in Country S, which has securities laws and regulations that are stricter than the Code and Standards.

According to the CFA Institute Code and Standards, which of the following statements about Black and White is TRUE?

Black must adhere to the:

White must adhere to the

A) Code and Standards law of Country S

B) law of Country L law of Country S

C) law of Country N law of Country L

bmaggie

Mega Securities, a multinational investment advisor based in the United States, employs the following analysts who practice in multiple jurisdictions.

• Melissa Black, CFA, resides in Country N, which has no securities laws or regulations, but does business in Country L, which has securities laws and regulations that are less strict than the Code and Standards.
• Tom White, a CFA Institute member, resides in Country L, but does business in Country S, which has securities laws and regulations that are stricter than the Code and Standards.

According to the CFA Institute Code and Standards, which of the following statements about Black and White is TRUE?

Black must adhere to the:

White must adhere to the

A) Code and Standards law of Country S

B) law of Country L law of Country S

C) law of Country N law of Country L

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Because the applicable law in Country L is less strict than the Code and Standards, Black must adhere to the Code and Standards. Because the applicable law is stricter than the Code and Standards, White must adhere to the more strict applicable law of Country S.

bmaggie

A CFA Institute member is also a member and the portfolio manager of an environmentalist group. In its charter, the environmentalist group lists a group of companies its members should boycott. The CFA Institute member would violate Standard I(A) concerning obeying all rules and regulations if the member:

A) performs either of the activities listed here.

B) actively protests against a publicly traded firm boycotted by the group.

C) purchases stock of a boycotted firm for the group's portfolio.

bmaggie

A CFA Institute member is also a member and the portfolio manager of an environmentalist group. In its charter, the environmentalist group lists a group of companies its members should boycott. The CFA Institute member would violate Standard I(A) concerning obeying all rules and regulations if the member:

A) performs either of the activities listed here.

B) actively protests against a publicly traded firm boycotted by the group.

C) purchases stock of a boycotted firm for the group's portfolio.

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Standard I(A) says the member must be guided by all applicable rules and regulations of professional associations governing the member’s professional activities. Purchasing the stock for the firm would be a violation because it involves the member’s professional activities and the rules of a group to which the member belongs and works for. Actively protesting would not be covered by that standard.