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

A supervisor at an asset manager adopted written compliance procedures and reviews them periodically. An analyst on her team nonetheless violated a firm policy in a way the review did not detect. The supervisor most likely:

The supervisor may not have violated Standard IV(C). Having adopted reasonable procedures and taken steps to implement an effective compliance program, she is not automatically in breach when a violation occurs despite those efforts, although the violation may signal the procedures need improving.

  1. Aviolated Standard IV(C) because any violation by a subordinate shows the supervisor failed in her duty
  2. Bmay not have violated Standard IV(C) if the procedures were reasonable and she took steps to make the compliance program effectiveCorrect
  3. Cviolated Standard IV(C) unless she personally evaluated the analyst's conduct on a continuing basis

Explanation

If a supervisor has adopted reasonable procedures and taken steps to institute an effective compliance program, she may not be in violation if violations occur despite these efforts. A violation may indicate the procedures are inadequate, but it does not automatically mean a breach, and personal continuous evaluation is not required.

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