CFA Practice Question
Liz Hurley is an investment advisor who has recently started advising a client, Zeta, regarding investment decisions. Zeta lives in Imphal, where investment laws are quite lax, almost non-existent. Hurley is domiciled in Britania, where investment laws clearly specify that the laws governing finance professionals in any given case are the laws that govern their clients. Britania laws, in general, are far stricter than the CFA Institute Code of Ethics. In her dealings with Zeta, Hurley, a CFA candidate, must follow ______.
A. Imphal's laws.
B. Britania's laws.
C. CFA Institute's Code of Ethics.
Explanation: In her dealings with Zeta, Hurley is governed by Imphal's laws, as specified by Britania's laws. Since Imphal laws are almost non-existent, the code of ethics sets a stricter standard and hence, as a CFA candidate, Hurley must follow the CFA Institute code.
User Contributed Comments 16
| User | Comment |
|---|---|
| Vaughan | Could someone please clarify this answer for me. I was under the impression that one was always suppose to adhere to the "strictest" law in place? In this case Britania laws. |
| mark98007 | Hurley's home (and business?) is based in Britania, so it seems to me she is bound by Britania law for this q... |
| mark98007 | ...by following local law (less strict), then defaulting to CFA code (more strict), she is still "following" Britania law (even more strict but specifying client-- less strict) in this example. |
| CocaColas | One has to adhere to the strictest applicable law. In this case it is the CFA code since Britania would require by law to follow the lax law of Imphal.. |
| dimanyc | CocaColas has a great point. That sentence in the question is key. |
| Kuki | ..........where investment laws clearly specify that the laws governing finance professionals (Hurley who lives in britania) in any given case are the laws that govern their clients (Zeta who lives in Imphal) therefore CFA code should apply because Imphal laws are lax(er) compared to CFA code. |
| dlukas | Britannia law would defer to Impal, which would be superceded by the CFA code. HOWEVER if there was even one Impal law that was stricter than the CFA code, which the question does not rule out, the CFA code would could not be unequivocally followed. |
| u0302638 | i think the question is tricky... But becos it ask: IN THE DEALINGs WITH ZETA so law at Zeta is applicable. Since Zeta's law is less strict than Code and Standard. Members must follow Code and Standard |
| chandsingh | Yup, it got me with its word play - since britanuia requires imphal , we should default to cfa code |
| MaresaJaden | Wow that was tricky. |
| tommyguard3 | Great Question!Very tricky, I got it wrong, but now I will be watching for this on the actual exam. |
| mary11 | stupid. not only do you have to understand the material you have to look for tricks on top of it. wounder why the pass rate is so low.. lol |
| farhan92 | i dont get this... 1) Hurley is domiciled in Britania 2)Britania Law specifies that laws governing professionals govern clients. Liz is domiciled in Britania so the laws of Britania would govern her. Therefore the Laws of Britania would also govern Zeta. What am i missing |
| Lambo83 | The line "Britania law specifies that laws governing professionals govern clients" could mean either way. It's a trick question in my opinion. Cleverly worded |
| will080912 | Very good question |
| Albireo | Wording is horrible. It should have been the other way around: the laws that govern their clients in any given case are the law governing all finance professionals. Then it would have been clear that she would be dealing using Imphal's law, and hence use CFA code of ethics. |