bapswarrior

Joan Platt, CFA, operates an investment advisory service in New York but maintains an office in Xania. Xania recently established a stock market, which is not very efficient. None of the Xanian stocks trade in the U.S. market. Xania legally permits the use of material inside information. Platt believes that using inside information would help her compete against other Xanian investment advisors and also help some of her Xanian clients reach their investment objectives. Platt is considering adopting local investment practices in Xania. According to CFA Institute Standards of Professional Conduct, Platt may:

A) use material inside information because Xania legally permits this practice.

B) use material inside information, but only after notifying CFA Institute.

C) not use material inside information.

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Because applicable law involving material inside information is less strict than the Code and Standards, Platt must adhere to the Code and Standards. Standard II(A) prohibits against use of material nonpublic information.

bapswarrior

Which of the following statements about the CFA Institute Code and Standards is most accurate? The Code and Standards:

A) do not require that members report legal violations to the appropriate governmental or regulatory organization.

B) require members to persuade the perpetrator to cease illegal activities.

C) prohibit members from accepting gifts that create a conflict with their employer's interest.

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The Code and Standards do not require members to report violations to legal authorities, but such disclosure may be prudent or required in certain circumstances. They do not require members to quit their jobs or to persuade violators to cease illegal activities. They do require that members report the activities to the appropriate person(s) in their own firm and disassociate themselves from the illegal actions. Members must obtain written permission to accept gifts that create a conflict with their employer's interest.

bapswarrior

Robe Advisory Services operates an office in San Francisco, where it manages portfolios for its clients based in the United States. The firm also maintains an office in Tokyo, where it employs Sam Lee, CFA who researches Japanese stocks. According to the CFA Institute Standards of Professional Conduct, Lee is required to maintain knowledge of and comply with all applicable laws, rules, and regulations in:

A) both the U.S. and Japan, but not the CFA Institute Standards of Professional Conduct.

B) both the U.S. and Japan and the CFA Institute Standards of Professional Conduct.

C) Japan, but not the U.S., and the CFA Institute Standards of Professional Conduct.

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To abide by the Standards, employees who work for foreign-based firms are required to apply the stricter of the foreign (here, U.S.) law, the domestic (here, Japanese) law, or CFA Institute standards.

bapswarrior

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

A) 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.

B) 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.

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

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

bapswarrior

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) Code and Standards law of Country S

B) law of Country L 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.

RobertA

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

B) 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.

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.

RobertA

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 Federal Reserve.

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.

RobertA

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.

RobertA

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.

RobertA

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.