FRM Part I · FRM Exam Part I · GARP Code of Conduct
A risk officer discovers that her firm's head of trading has been concealing losses by mismarking illiquid positions. The firm's policy requires reporting concerns to the head of trading first. She raises it with him; he tells her to drop it. Under the GARP Code of Conduct, which step best fits her obligations next?
She should escalate to compliance, senior management or the board, and consider external reporting if required, disclosing only what is necessary. Dropping it fails her duty not to be party to misrepresentation, while going to the press or secretly changing the marks breaches confidentiality or proper process.
- ADrop it, since she followed the firm's reporting policy
- BImmediately send the details to the press to prevent investor harm
- CEscalate through higher authorities such as compliance, senior management, or the board, and consider external reporting if required, while limiting disclosure to what is necessaryCorrect
- DQuietly adjust the position marks herself in the risk report without informing anyone
Explanation
Members must not knowingly misrepresent risk information and must escalate unethical conduct. When the immediate channel fails, she should use higher internal channels and external ones if legally required. Going straight to the press breaches confidentiality beyond what is needed. Silent adjustment is unauthorized and conceals the issue. Following the policy once does not end the duty.
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