CFA Practice Question

CFA Practice Question

According to Standards of Professional Conduct, the following are procedures for compliance for one of the Standards of Professional Conduct:

I. Require communication to supervisors of any information that is believed to be material or non-public.
II. Establish training and compliance procedures.
III. Keep all research such that the firm is able to substantiate all its investment decisions.

Which Standard of Professional Conduct do these compliance procedures relate to?
A. Standard I (B) - Independence and objectivity.
B. Standard III (A) - Loyalty, prudence, and care.
C. Standard II (A) - Material non-public information.
Explanation: Standard II (A) Material non-public information.

In terms of compliance with this Standard members should:
  • Require communication to supervisors of any information that is believed to be material or non-public.
  • Establish training and compliance procedures.
  • Review accounts of customers for any patterns that would reflect any suspicious trading.
  • Keep all research such that the firm is able to substantiate all its investment decisions.

User Contributed Comments 4

User Comment
jmcarr02 "I. Require communication to supervisors of any information that is believed to be material or non-public."
What if the supervisor is the kind of guy who will actually take advantage of the insider information?!!
charliedba you worried too much. If you raise "what if" question like this you would not be able to answer any CFA questions.
krisscfa good one charlie
Mikehuynh Also need to establish "firewall" between corporate finance department and investment department in order to prevent any flow of info
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