RobertA

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) Rely on past practices followed within his firm.

B) Review written compliance procedures on a regular basis.

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 in applicable laws, rules, and regulations.

RobertA

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.

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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.

RobertA

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

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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.

RobertA

Jason Blackwell, CFA, works as an investment manager for Mega Capital, a large multinational brokerage firm. He resides in a country whose applicable law is stricter than the Code and Standards but does business with clients in a country whose applicable law is less strict than the Code and Standards. Blackwell decides to follow the Code and Standards for clients in the less strict country. While Blackwell is still employed at Mega, Lego Associates verbally asks Blackwell to review client portfolios during evenings and weekends for a fee. Blackwell gets written consent from his immediate supervisor at Mega to undertake this independent activity for a one-month trial basis.Which of the following statements about Blackwell’s actions involving Standard I, Professionalism, and Standard IV(A), Loyalty is most accurate? Blackwell:

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

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

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

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Blackwell violated Standard I, Professionalism. Because the applicable laws in his resident county were stricter than the Code and Standards, he must adhere to the more strict applicable law.

RobertA

Bob Smith, CFA, is an outside board member of Atlantic Technologies, but is not paid by the firm for his services. An employee at Atlantic informs Smith that Atlantic has improperly timed the booking of contracts to achieve the desired quarterly financial results. The misleading financial statements would turn losses into profits. Smith confers with the firm's legal counsel who indicates that this conduct is, in fact, illegal. Smith urges Sharon White, Atlantic's chief operating executive, to change the financial statements, but she refuses to do so. According to CFA Institute Standards of Professional Conduct, which of the following statements best describes what Smith should do in this situation?

A) Smith should immediately make CFA Institute aware of the situation at Atlantic.

B) Smith should promptly disassociate himself from Atlantic's actions by resigning as a director or by reporting the activities to the appropriate authorities.

C) Smith should wait until the next board meeting, which is scheduled in two weeks, to make other board members aware of the situation.

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Smith should disassociate from any illegal activity by resigning as a director or by reporting the activities to appropriate authorities. Inaction combined with continuing association with Atlantic's illegal conduct may be construed as participation, or assistance, in the illegal conduct.

RobertA

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.

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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.

RobertA

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

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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.

RobertA

A government committee has concluded that investment company fees should be disclosed to clients each quarter and has proposed new legislation to require this. Currently, the legal requirement is to report such data annually. In compliance with current legal requirements, Dolphin Investments discloses its fees annually. Eugene Shin, CFA, Dolphin's compliance officer, learns of the proposed changes but does not convert Dolphin's reporting to a quarterly basis. Shin's decision not to act:

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

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

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

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The potential change in the law is only a proposal at this stage. There is no violation as long as Dolphin is following the regulations currently in force.

RobertA

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 NOT correct? 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.

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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.

RobertA

Mary Kim practices in the economically advanced country of Oldasia as well as in the emerging market country of Newasia. By regulation, Oldasia prohibits licensed investment advisors from trading in securities ahead of their clients. Newasia has no laws or regulations in this area. According to the CFA Institute Standards of Professional Conduct, Kim may:

A) not trade ahead of her clients in either country.

B) trade ahead of her clients in Newasia only.

C) trade simultaneously with her clients in Newasia only, as long as she has made full disclosure to her clients that she reserves the right to do this.

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Under Standard I(A) Knowledge of the Law must apply the CFA Institute Code and Standards or the controlling law, whichever is stricter. Because Standard VI(B) Priority of Transactions requires members to put client trades ahead of their own transactions, Kim must follow the standard in the absence of governing law or where the law is less strict than the Standard.