Question #9
Reading: Reading 42.1 Standards of Professional Conduct Guidance for Standards I
PDF File: Reading 42.1 Standards of Professional Conduct Guidance for Standards I.pdf
Page: 4
Status: Correct
Correct Answer: B
Question
Shortly after becoming employed by Valco & Co., an investment banking firm, Stan McDowell, CFA, learns that most of Valco's initial public offerings (IPO) are really put in place to profit management via price manipulation of the shares. McDowell observes an illegal act, sanctioned by senior management, in progress and refuses to sign off on his responsibility. Instead, McDowell takes the documentation to his supervisor and tells him he should sign it in his place. This action is:
Answer Choices:
A. an overreaction. Senior management's sanctioning of the act absolves McDowell from his ordinary responsibility as a CFA Institute member
B. a violation of the Code and Standards since he is required not to knowingly participate or assist in such an act
C. a suitable reaction, and he is in compliance with the Code and Standards
Explanation
McDowell, by his action in taking the documentation to his supervisor, is knowingly
participating in and/or assisting in an illegal act. This is clearly prohibited under Standard
I(A), and he is in violation of the Standard.
(Module 42.1, LOS 42: I(A))