CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Which of the following is (are) correct regarding a member's duty under the Code and Standards?

I. In the absence of specific applicable laws or other regulatory requirements, the Code and Standards govern the member's actions.
II. A member is required to comply with applicable local laws, rules, regulations, or customs, even though the Code and Standards may impose a higher degree of responsibility or a higher duty on the member.
III. A member who trades securities in a foreign securities market where no applicable local laws or stock exchange rules regulate the use of material nonpublic information may take investment action based on material nonpublic information.
A. I only
B. I and II only
C. II and III only

User Contributed Comments 16

User Comment
stefdunk You must always comply with applicable local laws. When the code of standards is stricter, you must adhere to both.
Munch Totally agree. Memebers must conform to whichever is more strict the law or the standard. Where there is no law use the standard. The only circumstance I can think of is GIPS where if the GIPS are in conflict with local laws you must use the local laws.
jjowen A > x, x > y, can we say A > y? certainly II is true. That is, A should comply with CFA Institute standrads (x) when CFA Institute standards are more strict than local laws (y). Should A comply with local laws (A > y?) Yes.
keithinny II is not correct. What if the local custom was bribery ? Members must adhere to the stricter CFA Institute standards.
Rguerra There should be an "only" word somewhere in answer II, otherwise it becames somewhat biased and could be interpreted as true.
pjudin Quote from CFA Readings
/In the event conflict, members and candidates must comply with MORE STRICT law, rule, or regulation./
mcspaddj I could see II being wrong if there was a law saying you "must" bribe or something silly. Since laws basically tell you what you can't do, I think II is correct because in applying the standards you are almost always also in correlation with the law, especially if the laws are more strict. I agree the word "only" should be in here.
mcspaddj I meant "especially if the standards are more strict." in the second to last sentence. I should proofread more often.
HenryQ Does the fact that one comply with local laws mean he does not comply with CFA standards which are stricter? II is for sure correct. Unless abiding by some local law is a violation of CFA standards, but can that happen though? I don't believe so.
hyperinflation Whether the CFA Code is more strict or less strict, you should always obey the law, no matter what. That's obvious. The CFA Code would never require someone to break the law. This is common sense.
gill15 No. You are NOT supposed to obey the local rules if CFA's are more strict. I'm not talking about legality issues in normal everyday life. In business if the CFA rules are more strict -- you follow them. One of the options in II just states Rules......
Dont get this
gill15 I think its just union. Stupid wording. CFA rules already include the minimum rules of the country so you must obey them.

I would never get this right on an exam if I didnt do practice questions. Nothing to do with knowledge
jj122 Why is III correct too ?
nguyenluan I think the key word in this question is "specific". When there is something that the laws and regulations that is not covered within that jurisdiction, then the CoS will govern actions. When there is nothing in specific that is not covered by laws and regulations within that jurisdiction, the individual must abide to those laws and regulations, in accordance with the CoS.
ascruggs92 I just don't get why they would word it that way. If the CFA standards are more strict, doesn't that imply that they cover the local requirements and more? If that weren't the case, what if it were customary (and legal) in a foreign to trade on non-public information? The way II is worded makes it sounds as if that would be okay, but that would be contradictory since III is incorrect.
shwang The question is whether or not the law and the CoS have a linear relationship with regards to strictness (E.g., the law requires reporting within 30 days whereas the CoS is stricter and requires reporting within 3 days) or if the relationship is not linear (E.g., the law requires prioritizing corporations as part of an economic incentive package whereas the CoS calls for fairness between corporate and non-corporate clients). In the former case, it is possible to comply with both the law and the CoS by simply abiding by the stricter CoS. In the latter case, the CoS is clearly stricter but it is impossible to comply with both the law and the CoS since they are directly opposed. Without clarification, it is uncertain whether option II is correct.
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