Q31.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)  No, because the member unknowingly broke the rule.

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

Q32.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)     law of Country L                         law of Country S

B)     Code and Standards                   law of Country S

C)     law of Country N                         law of Country L

Q33. 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)  purchases stock of a boycotted firm for the group's portfolio.

B)  performs either of the activities listed here.

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

Q34.Allen Parsons, a CFA candidate, suspects a colleague at his firm of engaging in an illegal activity. Which of the following statements about procedures for compliance involving Standard I(A), Knowledge of the law is FALSE? Parsons:

A)  is required to report this legal violation to the appropriate governmental or regulatory organizations.

B)  should urge his firm to attempt to persuade the perpetrator to cease such conduct.

C)  should consult counsel to determine whether the conduct is, in fact, illegal.

Q35.Michael Bellow, CFA, CAIA, is an investment banker who is involved with an initial public offering (IPO) of NewCo. Because this is Bellow’s first involvement in an IPO, he reports to an experienced supervisor. While reviewing past financial statements provided by NewCo, Bellow suspects that NewCo deliberately overstated its earnings for the past several quarters. Bellow seeks the advice of his firm’s highly competent general counsel and follows the advice given without deviation. Based on the general counsel’s advice, Bellow consults his immediate supervisor about the suspected overstatement of earnings. After reviewing the situation, Bellow’s supervisor explains why NewCo’s calculations of its earnings are correct. Bellow realizes that his inexperience and exuberance initially led him to an incorrect conclusion about NewCo’s earnings.

Which of the following statements about Bellow’s actions involving Standard I(A), Knowledge of the law, and Standard I(C), Misrepresentation, is TRUE? Bellow:

A)  violated both Standard I(A) and Standard I(C).

B)  did not violate either Standard I(A) or Standard I(C).

C)  violated Standard I(A) but did not violate Standard I(C).

Q31-33答案和详解如下：

Q31.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)  No, because the member unknowingly broke the rule.

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

 Correct answer is C)

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).

Q32.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)     law of Country L                         law of Country S

B)     Code and Standards                   law of Country S

C)     law of Country N                         law of Country L

 Correct answer is B)

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.

Q33. 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)  purchases stock of a boycotted firm for the group's portfolio.

B)  performs either of the activities listed here.

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

 Correct answer is A)

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.

Q34-35答案和详解如下：

Q34.Allen Parsons, a CFA candidate, suspects a colleague at his firm of engaging in an illegal activity. Which of the following statements about procedures for compliance involving Standard I(A), Knowledge of the law is FALSE? Parsons:

A)  is required to report this legal violation to the appropriate governmental or regulatory organizations.

B)  should urge his firm to attempt to persuade the perpetrator to cease such conduct.

C)  should consult counsel to determine whether the conduct is, in fact, illegal.

 Correct answer is A)

Standard I(A), Knowledge of the law, does not require that Parsons report legal violations to the appropriate governmental or regulatory organizations, but such disclosures may be appropriate under certain circumstances.

Q35.Michael Bellow, CFA, CAIA, is an investment banker who is involved with an initial public offering (IPO) of NewCo. Because this is Bellow’s first involvement in an IPO, he reports to an experienced supervisor. While reviewing past financial statements provided by NewCo, Bellow suspects that NewCo deliberately overstated its earnings for the past several quarters. Bellow seeks the advice of his firm’s highly competent general counsel and follows the advice given without deviation. Based on the general counsel’s advice, Bellow consults his immediate supervisor about the suspected overstatement of earnings. After reviewing the situation, Bellow’s supervisor explains why NewCo’s calculations of its earnings are correct. Bellow realizes that his inexperience and exuberance initially led him to an incorrect conclusion about NewCo’s earnings.

Which of the following statements about Bellow’s actions involving Standard I(A), Knowledge of the law, and Standard I(C), Misrepresentation, is TRUE? Bellow:

A)  violated both Standard I(A) and Standard I(C).

B)  did not violate either Standard I(A) or Standard I(C).

C)  violated Standard I(A) but did not violate Standard I(C).

 Correct answer is B)

Bellow did not violate Standard I(A), Knowledge of the law, because he sought advice of counsel and followed that advice. Bellow did not violate Standard I(C), Misrepresentation, because he made reasonable and diligent efforts to ensure the accuracy of the information and to avoid any material representation.

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[2009] Session 1-Reading 2-I: Standards of Professional Conduct & Guidance: Professionalism- LOS A

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