kim226

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

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

B) 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.

C) 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.

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

kim226

A CFA Institute member conscientiously maintains records of changes in security regulations. The member notices that his colleagues do not, and does NOT say anything. Is this a violation of Standard I(A)?

A) Yes, because the member is bound by the Code of Ethics.

B) Yes, and the member should disassociate from these colleagues.

C) No, as long as the colleagues do not violate the new rules.

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The last bullet point of the Code says that a member shall “Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.” Ignoring the neglect of rule changes of others would clearly be incongruent with this component. As long as the colleagues do not violate the laws, the member does not have to disassociate himself from the colleagues.

kim226

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.

kim226

A CFA Institute member works for Secure Securities, Inc., and plays rugby on the firm’s rugby team. Secure Securities’ team recently played the team of a rival firm. During the game, a fight broke out and the CFA Institute member was the instigator, but no one was seriously hurt. Is this a violation of I(A) concerning maintaining knowledge and complying with laws, rules, and regulations?

A) Yes, because the member is bound by the Code of Ethics.

B) No, because a fight at a rugby game is not a professional activity.

C) Yes, because the member could have hurt someone in the fight.

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Standard I(A) covers members' professional activity only. Violations outside professional activity that involve fraud, theft or deceit would potentially be violations.

kim226

What is the rule of thumb for members, CFA charterholders and candidates in the CFA program when weighing the requirements of the CFA Institute Code and Standards and the requirements of local laws? If the applicable laws are:

A) less strict, they should make a judgment call on which to follow, the Code and Standards or the local laws and requirements.

B) more strict, they must still follow the Code and Standards.

C) more strict, they must adhere to the applicable laws.

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The rule of thumb for members, CFA charterholders and candidates in the CFA program requires that they adhere to the applicable laws if the applicable laws are more strict than the requirements of the Code and Standards. If there are no laws or the laws are less strict, they must adhere to the Code and Standards.

kim226

CFA Institute members should encourage their employers to do all of the following EXCEPT:

A) require employees to write personal ethics statements.

B) make clear that dishonest personal behavior reflects poorly on the profession.

C) conduct background checks on potential employees to ensure that they are of good character and eligible to work in the investment industry.

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There is no reason to have employees write personal ethics statements. CFA Institute encourages all of the other actions.

kim226

CFA Institute believes:

A) that a minimum level of professional responsibility and conduct dictates that members be aware of and comply with laws, rules, and regulations governing their conduct.

B) that a maximum level of professional responsibility and conduct dictates that members be aware of and comply with laws, rules, and regulations governing their conduct.

C) that firms should comply with all domestic laws and regulations and that these laws also govern behavior in foreign markets, regardless of foreign laws and requirements.

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CFA Institute’s Code and Standards dictate a minimum level of conduct. Standards should not be based on ethics of upper management and the board of directors of a company. Firms must comply with the strictest applicable standards, whether they be foreign or domestic laws and regulations.

kim226

Kenny Barrett, CFA, is working in the Australian office of American Investments Co. From an informal conversation, Barrett learns that the company’s most recent investment report was based on misappropriated information. No one at the Australian office expresses concern, however, because there has been no breach of Australian law. Barrett should:

A) seek advice from company counsel to determine appropriate action.

B) do nothing because the branch is outside of U.S. jurisdiction.

C) disassociate himself from the case with a written report to his supervisor.

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Kenny’s best choice is to seek the company counsel’s advice. If Kenny does nothing, he is breaching Standard I(A) Knowledge of the Law. Disassociation is not enough.

kim226

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

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

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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.

kim226

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 Federal Reserve.

B) The investing public.

C) The profession.

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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.