CFA Practice Question

There are 361 practice questions for this study session.

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?

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

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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.