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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 TRUE?

Black must adhere to the:

White must adhere to the

A) law of Country N law of Country L

B) law of Country L law of Country S

C) Code and Standards law of Country S

D) law of Country L Code and Standards

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Answer and Explanation

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.

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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. Lee is required to maintain knowledge of and comply with all applicable laws, rules, and regulations in:

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

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

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

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

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Answer and Explanation

Members 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.

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

A) 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.

B) A member who trades securities in a foreign securities market where no applicable local laws or stock exchange rules regulate the use of material nonpublic information may take investment action based on this information.

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

D) 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.

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Answer and Explanation

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