HuskyGrad2010

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 CORRECT?

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

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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.

HuskyGrad2010

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 CORRECT?

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

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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.

HuskyGrad2010

Shortly after becoming employed by Valco & Co., an investment banking firm, Stan McDowell, CFA, learns that most of Valco's initial public offerings (IPO) are really effected in order to profit management via price manipulation of the shares. McDowell observes an illegal act, sanctioned by senior management, in progress and refuses to sign off on his responsibility. Instead, McDowell takes the documentation to his supervisor and tells him he should sign it in his place. This action is:

A) a violation of the Code and Standards since he is required not to knowingly participate or assist in such an act.

B) an overreaction. Senior management's sanctioning of the act absolves McDowell from his ordinary responsibility as a CFA Institute member.

C) a suitable reaction, and he is in compliance with the Code and Standards.

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McDowell, by his action in taking the documentation to his supervisor, is knowingly participating in and/or assisting in an illegal act. This is clearly prohibited under Standard I(A), and he is in violation of the Standard.

HuskyGrad2010

If an analyst suspects a client or a colleague of planning or engaging in ongoing illegal activities, which of the statements about the actions that the analyst should take is most correct? According to the CFA Institute Standards of Professional Conduct, the analyst should:

A) consult counsel to determine the legality of the activity and disassociate from any illegal or unethical activity if the member has reasonable grounds to believe that the activity is illegal or unethical.

B) disassociate from any illegal or unethical activity if the member has reasonable grounds to believe that the activity is illegal or unethical.

C) consult counsel to determine the legality of the activity.

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According to the procedures for compliance involving Standard I(A), CFA Institute members should determine legality and disassociate from any illegal or unethical activity.

HuskyGrad2010

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 investing public.

B) The profession.

C) The Federal Reserve.

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

HuskyGrad2010

Maria Valdes, CFA, is an analyst for Venture Investments in the country of Newamerica, which has laws prohibiting the acceptance of any gift from a vendor if the gift exceeds US $250. Valdes has evidence that her Venture Investments colleague, Ernesto Martinez, CFA, has been receiving gifts from vendors in excess of US $250.Valdes is obligated to:

A) disassociate herself from the activity, and urge Venture to persuade Martinez to cease the activity.

B) disassociate herself from the activity, urge Venture to persuade Martinez to cease the activity, and inform CFA Institute of the violation.

C) disassociate herself from the activity, urge Venture to persuade Martinez to cease the activity, and inform CFA Institute and regulatory authorities of the violation.

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Standard I(A), Knowledge of the Law requires members who have knowledge of colleagues engaging in illegal activities to disassociate from the activity and urge their firms to persuade the individual to cease such activity. Reporting to regulatory authorities may be prudent in certain circumstances, but is not required. Reporting to CFA Institute is not required.

HuskyGrad2010

John Martin, an analyst, discovers that Jurix Co. has knowingly misstated information in its prospectus. To comply with CFA Institute’s Code of Ethics and Standards of Professional Conduct, Martin's most appropriate course of action is to:

A) call the appropriate regulatory agency and report the action.

B) resign from his job in order to disassociate from the potentially illegal activity.

C) report the finding to the appropriate supervisory person in his firm.

To comply with the Code and Standards, John should notify the appropriate supervisory person in his firm of the violation.

HuskyGrad2010

An analyst, who is a CFA charterholder, is working in a foreign country. Which of the following statements is CORRECT? The analyst is:

A) covered by the strictest of the following laws and rules: his own country's, the foreign country's or CFA Institute's Code and Standards.

B) governed by the laws and standards of the country in which he is living and working.

C) governed by CFA Institute's Code and Standards.

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The analyst is covered by the strictest of the following laws and rules: his own country’s, the foreign country’s or CFA Institute’s Code and Standards.

HuskyGrad2010

Josh LeBlanc, a CFA charterholder, is an investment analyst for a small stock brokerage firm. He wants to acquire and maintain knowledge about applicable laws, rules, and regulations relating to his professional activities. According to the CFA Institute Standards of Professional Conduct, which of the following ways is least likely to meet compliance procedures?

A) Review written compliance procedures on a regular basis.

B) Rely on past practices followed within his firm.

C) Keep informed about changes in applicable laws, rules, and regulations.

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LeBlanc should follow the compliance procedures under Standard IA -- Knowledge of the law. Relying on his firm’s past practices may be insufficient for LeBlanc to stay current with changes

HuskyGrad2010

Janet Green, CFA, provides investment advice and other services to clients in several countries. She resides in Country A whose securities laws and regulations are less strict than the Code and Standards. She also conducts business with clients in Country B, which has no securities laws or regulations, and in Country C, which has securities laws and regulations that are stricter than the Code and Standards. Which of the following statements is CORRECT? According to CFA Institute Standards of Professional Conduct, Green must adhere to the Code and Standards in:

A) Country A, Country B, and Country C.

B) Country A but the law in Country B and Country C.

C) Country A and Country B but the law in Country C.

Green needs to follow Standard I(A) -- Knowledge of the law. In Country A, Green must adhere to the Code and Standards because Country A’s laws are less strict. In Country B, Green must also adheres to the Code and Standards because Country B has no securities laws. Because Country C’s applicable law is stricter than the requirements of the Code and Standards, Green must adhere to the laws of Country C.