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

A supervisor at a brokerage finds that the firm has no written compliance procedures and cannot establish firm-wide policies herself. After she raised the problem with senior managers and recommended corrective action, they took no action. The supervisor's most appropriate course is to:

She should decline supervisory responsibility until the firm adopts reasonable procedures. Having reported the gap and recommended correction, she still clearly cannot discharge her duties without a compliance system, so Standard IV(C) directs her to decline supervision rather than continue or improvise unwritten rules.

  1. Acontinue supervising, because she lacks authority to change firm-wide policy and has already reported the issue
  2. Bdecline to accept supervisory responsibility until the firm adopts reasonable procedures that allow adequate supervisionCorrect
  3. Csupervise informally using her own unwritten rules, which satisfies the requirement for a compliance system

Explanation

A supervisor must bring an inadequate compliance system to senior managers' attention and recommend corrective action. If she clearly cannot discharge her responsibilities because of the absence or inadequacy of a system, she should decline supervisory responsibility until reasonable procedures are adopted. Lacking authority does not excuse continuing to supervise without a system.

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