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Which of the following statements about Standard IV(C), Responsibilities of Supervisors, is NOT correct? CFA Institute members with supervisory authority:

A)
are expected to bring an inadequate compliance system to the attention of the firm's senior managers and recommend corrective action.
B)
may delegate supervisory duties, which relieves them of their supervisory authority.
C)
are expected to have in-depth knowledge of the Code and Standards and to apply this knowledge in discharging their supervisory responsibilities.


Standard IV(C) permits members to delegate supervisory duties but such delegation does not relieve members of their supervisory responsibility.

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Wanda Kirby, CFA, recently joined Allegheny Investments as a senior analyst. Because of her extensive experience in the investments business and knowledge of the Code and Standards, Allegheny's management asked her to assume supervisory responsibility. Kirby reviewed Allegheny's existing compliance system and determined that it was inadequate to allow her to clearly discharge her supervisory responsibility. According to CFA Institute Standards, Kirby should:

A)
decline in writing to accept supervisory responsibility until Allegheny adopts reasonable procedures to allow her to adequately exercise such responsibility.
B)
agree to accept supervisory responsibility provided that Allegheny adopts reasonable procedures to allow her to adequately exercise such responsibility.
C)
agree to accept supervisory responsibility and to develop reasonable procedures to allow her to adequately exercise such responsibility.


If Kirby clearly cannot discharge supervisory responsibilities because of an inadequate compliance system, she should decline in writing to accept supervisory responsibility until Allegheny adopts reasonable procedures to allow her to adequately exercise such responsibility.

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For years John Berger, a CFA charterholder and CEO of a company, relied upon a set of reasonable procedures for preventing violations of the Code and Standards of Professional Conduct in the firm. To not be liable for a violation of the Standards, Berger must:

A)
both periodically review the procedures and ensure the procedures are monitored and enforced.
B)
do nothing more than have the set of procedures in place as stated.
C)
ensure the procedures are monitored and enforced.


As a CEO, Berger is responsible for implementing and maintaining appropriate compliance procedures. He must also ensure the procedures are monitored and enforced.

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Karen Dalby, CFA, is a rising star at a major investment bank and has an extremely demanding schedule. To avoid "burning out" new hires, the bank has instituted a mandatory vacation policy which requires employees to take at least 5 days of vacation per year. At the end of the year, Dalby has taken no vacation, but is scheduled to travel to Fiji to take the mandatory 5 days. The bank’s most important client is suddenly targeted in a hostile takeover and asks specifically for Dalby to join the takeover defense team. Her supervisor, Hank Lone, CFA, asks Dalby to cancel her vacation and she complies. Lone is most likely:

A)
in violation of Standard IV(C) "Responsibilities of Supervisors."
B)
not in violation of the Code and Standards.
C)
in violation of Standard IV(A) "Loyalty."


Lone has a responsibility to equally enforce all firm policies to demonstrate that all rules are equally important.

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Susan Tigra, CFA, is a portfolio co-manager for the Sandia Energy pension fund. She has been contacted by Ted Garnet, a former classmate. Garnet has started his own investment management firm and would like Sandia Energy to move a portion of its assets to be managed by his firm. Tigra moves 5% of the pension fund to Garnet’s firm to help him build his assets under management. Kurt Show, CFA, is Tigra’s supervisor. Show notes the move, but does not investigate. Show is most likely:

A)
not in violation of the Code and Standards.
B)
in violation of Standard V(A) "Diligence and Reasonable Basis."
C)
in violation of Standard IV(C) "Responsibilities of Supervisors."


Show should review important changes to the portfolio for compliance with firm policies and procedures. The decision to work with Garnet seems arbitrary, and may not be necessary or prudent.

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