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CFA Level I · CFA Level I Exam · Code of Ethics and Standards of Professional Conduct

A member is an employee of a firm that has no compliance procedures at all, and she is given supervisory responsibility over several analysts. According to Standard IV(C), the member most appropriately should:

She should decline supervisory responsibility in writing until adequate procedures exist, or recommend that the firm adopt written compliance procedures. Standard IV(C) expects supervisors to make reasonable efforts to prevent violations, which is not possible without compliance procedures, and delegation or informal reliance does not satisfy this.

  1. Adecline supervisory responsibility or recommend that the firm adopt compliance procedures in writingCorrect
  2. Bsupervise the analysts and rely on their own professional judgment
  3. Cdelegate supervision entirely to the analysts' senior colleagues

Explanation

A supervisor who finds that the firm lacks adequate compliance procedures should decline in writing to accept supervisory responsibility until reasonable procedures are adopted, or recommend that they be developed. Relying on analysts' judgment or delegating without oversight does not meet the duty to make reasonable efforts.

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