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CFA Level I · CFA Level I Exam · Guidance for Standard IV: Duties to Employers

A firm has written compliance procedures, and the supervisor Lena Ortiz adopted them. Ortiz learns that traders routinely skip the required pre-clearance step, but she takes no action because the procedures exist. Ortiz has most likely:

Ortiz has most likely violated Standard IV(C). Having written procedures is not enough when a supervisor knows or should know they are not being followed. Supervision includes ensuring procedures are followed through periodic review and acting on known failures.

  1. Acomplied with Standard IV(C), because adopting reasonable written procedures always satisfies the duty
  2. Bviolated Standard IV(C), because she knew the procedures were not being followedCorrect
  3. Ccomplied with Standard IV(C), because undetected violations never indicate inadequate procedures

Explanation

Members may violate Standard IV(C) if they know or should know that compliance procedures are not being followed. Merely enacting procedures may not be sufficient, and supervisors must ensure they are followed through periodic review. Option A overstates the protection given by adopting procedures.

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