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CFA Level I · CFA Level I Exam · Guidance for Standard VI: Conflicts of Interest

A firm requires employees to direct their brokers to send duplicate trade confirmations and periodic statements to the compliance department. The most likely purpose of this requirement is to:

Duplicate confirmations signal that personal trading is independently verified, reducing the likelihood of unethical behavior, and they let the firm check the flow of personal investments, which holdings reports alone cannot show. They supplement preclearance and holdings disclosure rather than replacing them.

  1. Asignal independent verification and allow checking of the flow of personal investments, not just holdingsCorrect
  2. Breplace the need for preclearance procedures
  3. Celiminate the need to disclose personal holdings

Explanation

Duplicate confirmations send a message of independent verification and enable verification of the flow of personal investments, which cannot be seen from holdings alone. They complement, not replace, preclearance and holdings disclosure.

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