bmaggie

 

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

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

C) did not violate either Standard I or 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.

bmaggie

A member or candidate who suspects that a colleague is violating the law should most appropriately:

A) consult with the company counsel to determine if in fact a law is being violated.

B) report the illegal activity to CFA Institute Professional Standards Review Board for action.

C) report all illegal activities to the appropriate regulatory agency.

bmaggie

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 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) 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.

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The Code and Standards represent a minimum level of guidance for members’ actions, not a maximum level. The key to remember here is that whether the local area does or does not have standards governing member’s actions, one must follow the stricter standard environment.

bmaggie

Ernesto Vivaldo is a CFA candidate. He is working in the branch office of an American-based investment company in Belgium. Vivaldo is a citizen of Venezuela. In his country, a portfolio manager is not required to disclose referral fees. Belgian law does not allow referral fees for portfolio managers. Vivaldo has been offered a deal that involves a referral fee. Vivaldo should:

A) follow the requirements of Venezuela.

B) follow the requirements of Belgium.

C) follow the requirements of CFA Institute.

bmaggie

Ernesto Vivaldo is a CFA candidate. He is working in the branch office of an American-based investment company in Belgium. Vivaldo is a citizen of Venezuela. In his country, a portfolio manager is not required to disclose referral fees. Belgian law does not allow referral fees for portfolio managers. Vivaldo has been offered a deal that involves a referral fee. Vivaldo should:

A) follow the requirements of Venezuela.

B) follow the requirements of Belgium.

C) follow the requirements of CFA Institute.

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According to Standard I(A) Knowledge of the Law, CFA candidates and current CFA Institute members must follow whichever law is stricter. In this case, the strictest laws are those of Belgium.

 

bmaggie

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

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

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

bmaggie

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

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

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.

bmaggie

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 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) 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.

bmaggie

Jane Dawson, CFA, an analyst at a New York brokerage firm, suspects that Bob Boatman, CFA, another analyst at the same firm, has violated a state securities law. According to the CFA Institute Standards of Professional Conduct, Dawson is:

A) NOT required to report the violation to the appropriate governmental or regulatory organizations.

B) required to report the suspected violation to CFA Institute.

C) required to report the suspected violation to the appropriate state regulatory agency.

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The Code and Standards do not require that members report legal violations to the appropriate governmental or regulatory organizations, but such disclosure may be prudent in certain circumstances. Dawson should consult legal counsel and disassociate from the activity.

bmaggie

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) 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.

B) 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.