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CFA modules questions with answers.An effective compliance system should include:
I. a regular review of employee conduct.
II. education and training programs.
III. a code of ethics. ANS -C) I, II, and III.
Feedback
A is incorrect. Under Standard IV(C): Responsibilities of Supervisors, an effective compliance system
includes a code of ethics and not just a regular review of employee conduct and education and training
programs.
Compliance practices that will assist in meeting the responsibilities of Standard I(A): Knowledge of the
Law include:
I. developing robust compliance policies and procedures.
II. establishing protocols for reporting suspected violations to your employer.
III. participating in continuing education programs on ethics and regulatory compliance. ANS -C) I, II, and
III.
Feedback
C is correct. The conduct in all three statements (I, II, and III) describe compliance practices that will
assist in meeting the responsibilities of Standard I(A): Knowledge of the Law.
CFA Institute members may only accept gifts, benefits, compensation, or consideration that competes
with or might reasonably be expected to create a conflict of interest with the employer's interest if they
obtain written consent from all parties involved. ANS -True
In the context of the CFA Institute Standard I(A): Knowledge of the Law, the "more strict" law or
regulation:
,I. imposes greater restrictions on your actions.
II. requires a greater degree of action to protect the interests of investors.
III. is subject to the greater penalty when the law is violated. ANS -B) I and II.
Standard IV(B): Additional Compensations Arrangements requires CFA Institute members to receive
permission from their employer to receive compensation from third parties for the same services the
members provide to their employer because such compensation may:
I. affect a member's loyalty and objectivity.
II. create potential conflicts of interests.
III. affect the employer's compensation and incentive structure. ANS -B) I and II.
Failure to report legal and ethical violations by others: ANS -C) may harm clients or the investing public.
CFA Institute Standard IV(A): Loyalty (to Employers) requires CFA Institute members to protect the
interests of their firm by:
I. refraining from any conduct that would injure the firm.
II. refraining from any conduct that would deprive the firm of the members' skills and ability.
III. subordinating personal interests to firm interests. ANS -B) I and II.
Dan and Aaron are both registered for the next offering of the Level III CFA Exam. Dan circulates a
résumé stating that he is a candidate for the CFA designation and has passed Level II of the CFA
Program. Aaron circulates a résumé stating that he is a CFA II. Which of the following statements is
correct? ANS -C) Only Aaron has violated the Code and Standards.
Under the Code and Standards, supervisors must design compliance programs that are appropriate for
the size and nature of the organization. ANS -A) True
Supervisors should implement incentive systems that: ANS -C) are firmly tied to client interests and how
outcomes are achieved.
, Which of the following statements about CFA Institute Standard I(A): Knowledge of the Law is NOT
correct? CFA Institute members should:
A)
know their firm's policies and procedures for accessing compliance guidance.
B)
remain vigilant in maintaining general knowledge of the legal requirements governing their investment
activities.
C)
not rely on outside compliance consultants to assist them in complying with the securities laws that are
applicable to their professional activities. ANS -C)
not rely on outside compliance consultants to assist them in complying with the securities laws that are
applicable to their professional activities.
Which one of the following statements is false?
A)
Members must comply with the Code and Standards even when doing so would conflict with applicable
law.
B)
Members must not engage in conduct that is legal if such conduct violates the Code and Standards.
C)
Members must comply with the Code and Standards in the absence of any applicable law. ANS -A)
Members must comply with the Code and Standards even when doing so would conflict with applicable
law.
Under the Code and Standards, a departing employee is generally free to make arrangements or
preparations to go into a competitive business only after terminating the relationship with his or her
employer, so as not to violate the employee's duty of loyalty. ANS -B) False
Which of the following is least likely to assist CFA Institute members in meeting their duty of loyalty to
their employer under the Code and Standards?
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