CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Which one of these four statements is not consistent with the recommended procedures for compliance?

A. Investment recommendations may be changed by an analyst without prior approval of a supervisory analyst.
B. Prior approval must be obtained for the personal investment transactions of all employees.
C. Pursuant to privacy of information laws, personal transactions will not be compared to those of customers, clients, and the employer unless requested by regulatory organizations.
D. Personal transactions for the purpose of these compliance procedures are limited to the employee and members of his or her immediate family and transactions involving a beneficial interest.
Correct Answer: C

User Contributed Comments 9

User Comment
stefdunk D should include discretionary accounts
hagi10 And market making
danlan A: recommendations need to be notified to client before, but not approval of a supervisory analyst.
sunilcfa I think it is ok for non material changes, but needs to be approved by supervisdor if material
rethan Does personal approval need to be obtained for by all employers before a transaction? Say for example I am working as a receptionist for an IB.The company is underwiting a stock offering for a company that I own.I have absolutely no access to information regarding the underwriting transaction or any material non public info about the company. Do I have to seek approval before I trade this stock?
My thinking on this is yes as the company would want to mitigate the APPEARENCE of conflict. Any comment regarding my line of thinking?
dblueroom I believe even as a receptionist, you need to disclose all holdings to the employer. B is a bit extreme, usually there is a list of resticted investments you shouldn't be trading (firm specific). However, personal trades must be reviewed periodically.

Probably B refers to trading the same securities that you do for clients.
joywind key word in the question: Recommended. Therefore, A&B are fine.
johntan1979 Agree with dblueroom. It's ridiculous to disclose all your personal investment activities that do not conflict with your company's interests.
hks101 Employees may not know whether their trades conflict with the company's interest. Had a company adopted a policy that relied on employee to voluntarily regulate their own investment transactions based on their proposed knowledge or lackof would not be a strong policy.

For example, say the receptionist is buying a stock the company representing in a M&A. The receptionist may not know that. However information may leak. Hence, all trading requires preclearance.
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