CFA Level I · CFA Level I Exam · Code of Ethics and Standards of Professional Conduct
A senior analyst, Maria Chen, supervises a team at an investment firm. A junior team member violates the firm's insider information policy. Maria had only informal, undocumented guidance for the team and no formal compliance procedures were in place. Under Standard IV(C) Responsibilities of Supervisors, Maria's conduct is most accurately described as:
Her conduct is a likely violation of Standard IV(C). Supervisors must make reasonable efforts to detect and prevent violations by those they supervise, and relying on undocumented, informal guidance without compliance procedures falls short, whether or not she profited or a regulator acted.
- Aa violation only if she personally profited from the junior's actions
- Ba violation only if the firm was held liable by a regulator
- Ca likely violation because she did not make reasonable efforts to detect and prevent violations by those under her supervisionCorrect
Explanation
Standard IV(C) requires members and candidates with supervisory responsibility to make reasonable efforts to ensure that anyone subject to their supervision complies with applicable laws, rules, regulations, and the Code and Standards. Lacking adequate compliance procedures is a failure of that duty, regardless of personal profit or regulatory action.
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