CFA Practice Question

CFA Practice Question

Anupam Bhatia is a portfolio manager for NT Partners. Bhatia has not set up procedures for recording time of trade and designating account for which trade was intended. His subordinates only designate the account after the trades have been made. An employee was caught trading on her personal account before the clients' accounts (front running). Bhatia reprimands the employee but takes no further action. Which of Bhatia's action(s) is (are) a violation(s) of Standard IV: (C) Responsibilities of Supervisors (Duties to Employers) Choose one answer.
A. Both, not setting up procedures for recording and only reprimanding and not taking further action.
B. Only reprimanding and not taking further action.
C. Not setting up procedures for recording.
Explanation: Procedures need to be set up. Only reprimanding is too light, as the CFA Institute says 'Once a supervisor learns that an employee has violated or may have violated the law or the Code and Standards, the supervisor must promptly initiate an investigation to ascertain the extent of the wrongdoing. Pending the outcome of the investigation, a supervisor should take steps to ensure the violations will not be repeated, such as placing limits on the employee's activities or increasing the monitoring of the employee's activities.'

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