- CFA Exams
- CFA Level I Exam
- Topic 10. Ethical and Professional Standards
- Learning Module 3. Guidance for Standards I-VII
- Subject 1. Standard I (A) Knowledge of the Law
CFA Practice Question
Arthur Miller, an analyst for an investment banking firm, recently discovered that John, one of his co-workers in the mergers and acquisitions department, has been illegally tipping off his cousin about an upcoming merger. What should Arthur do?
B. He should do nothing, since it's not his department.
C. He should encourage John to stop.
A. He should report this discovery to his supervisor.
B. He should do nothing, since it's not his department.
C. He should encourage John to stop.
Correct Answer: A
User Contributed Comments 15
| User | Comment |
|---|---|
| hunglongtemp | How about C? |
| 0is4eva | CFA material, Reading 2, p. 14: "...The first step should be to attempt to stop the behavior by bringing it to the attention of the employer through a supervisor or the compliance department. Members and candidates may consider directly confronting the person or persons committing the violation. If these attempts are unsuccessful, then members and candidates have a responsibility to step away and dissociate from the activity by taking such steps as removing their name from written reports or recommendations or asking for a different assignment." --> "...may consider..." means that there is no obligation for Arthur to encourage John to stop. Thus not C. |
| Swetha | Thank you for the explanation 0is4eva. Is that explanation from the Ethics Handbook ? |
| julamo | I would inform the FBI and put Fox Mulder on the case |
| Bibhu | Good explanation. |
| zzhumanov | The truth is out there |
| Khadria | Very well pointed out -> "may consider" by "0is4eva". Thanks!!! |
| eb2568 | How about ask John for some hot tips so he can trade in his own account? |
| TammTamm | If I'm remembering correctly, the Standards said "the analyst can try and ask the co-worker to stop the action" but I think telling the supervisor is better, that way the analyst won't be accused of collusion. IMO... |
| yanlun | nice to point out "may consider "="no obligation ", 0is4eva |
| Shalva | Thanks 0is4eva!!! Oh, and "the Mulder" version was also good :) |
| kforcfa | that was a tricky one! i was sure you have to confront the ill-doer in the first place! :) |
| bantoo | Very nicely explained by ois4eva |
| joywind | maybe "confronting directly" apply to the situations where the member/candidate has partial responsibility in the wrong-doing? |
| johntan1979 | Things get complicated if John is a relative or a very good friend of yours. What do you do then? I think most will say confront him first rather than immediately reporting to the supervisor. Never say close one eye and leave it. Better you than somebody else reporting him. |