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

A supervisor has adopted reasonable procedures and an effective compliance program, yet an employee conceals a violation that the supervisor does not detect. Under Standard IV(C), the supervisor most likely:

The supervisor may not have violated Standard IV(C), since reasonable procedures and an effective program were in place. Still, the fact that a violation occurred may indicate the compliance procedures are inadequate, so the supervisor should reassess them rather than assume the duty is fully satisfied.

  1. Ahas violated the Standard, because any violation by a subordinate breaches Standard IV(C)
  2. Bmay not have violated the Standard, although the occurrence may indicate the procedures are inadequateCorrect
  3. Chas satisfied the Standard and need not review the procedures afterward

Explanation

A supervisor who adopted reasonable procedures and an effective program may not violate IV(C) if violations occur despite those efforts. However, the occurrence of violations may indicate inadequate procedures, so review is still warranted.

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