Question #14
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: 6
Status: Incorrect
Correct Answer: B
Your Answer: A
Question
According to the CFA Institute Standards of Professional Conduct, Standard I(A), Knowledge of the Law, members shall not knowingly participate or assist in any violations of laws, rules, or regulations. An analyst:
Answer Choices:
A. must report all legal violations to the proper regulatory commission and is held responsible for participating in illegal acts when the law is evident to anyone knowing the law
B. is held responsible for participating in illegal acts when the law is evident to anyone knowing the law and is held responsible for violations by others when the analyst is unaware of the facts giving rise to the violation
C. is held responsible for participating in illegal acts when the law is evident to anyone knowing the law and can participate in a violation by having knowledge of the violation and taking no action to stop it or disassociate from it
Explanation
If you suspect someone is planning or engaging in illegal activities, you should:
1. Determine the legality of the activities. Consult your supervisor and legal counsel.
2. Take appropriate action. Disassociate, attempt to persuade the perpetrator to stop.
CFA Institute does not require you to report them to the authorities, but the law
might.
(Module 42.1, LOS 42: I(A))