- CFA Exams
- CFA Level I Exam
- Topic 10. Ethical and Professional Standards
- Learning Module 48. Guidance for Standards I-VII
- Subject 1. Standard I (A) Knowledge of the Law
CFA Practice Question
Mr. A, a CFA Institute's member resides and works in Country A, whose securities laws are less strict than CFA Institute's Standards of Professional Conduct. According to CFA Institute's Standards of Practice Handbook, Mr. A has a duty to comply with:
A. The laws of Country A only.
B. In the absence of specific applicable law from Country A, then CFA Institute's Code and Standards.
C. CFA Institute's Code and Standards only.
Explanation: Members who practice in multiple jurisdictions may be subject to varied securities laws. RULE OF THUMB: If the applicable laws are stricter than those of the code and standards, then the more strict laws apply, if the applicable laws are less strict then the laws of the code and standards apply. Since Mr. A practices in a lenient country he is obliged to follow the Code and Standards, therefore all other solutions are incorrect.
User Contributed Comments 9
| User | Comment |
|---|---|
| turtle | In my opinion B is wrong. Ff specific aplicable law from country A is less strict than CFA Institute Standards (for example allows insider trading) than Standards should be applied. |
| robbe1 | I agree with Turtle: answer B states that the applicable law is "absent". The question clearly states that an applicable law does exist. This law is more lenient than the CFA Institute Standards, however. |
| Spain81 | Answer B seems to suggest that as long as Country A has laws the CFA Institute code of standards does not apply when clearly the stricter rules always apply! |
| alexblk | the question states that the rules of this country are less strict. answer B states that in the absence of a specific applicable law (in this country) which I believe infers that even if there were a law in place it would be less strict than the CFA codes and standards. C is correct. |
| andrewevelyn | C says 'ONLY' which seems to conflict with Professionalism's rules on knowing and abiding by laws, regulations, etc. The CFA Institute does not have any authority to waive the laws of sovereign states - this seems obvious but I have never seen this specifically addressed and a lot of mock questions focus on this. Can anyone quote something relevant from the reading? |
| jmcneal | C is correct because if the CFA standards are ALWAYS more strice, (which the question implies), then following CFA standards will not only be within the law but also be within CFA standards. You will never break the law if the CFA standard is always more strict and you follow it. Its more of what the question implies and not a question of what to do if the CFA Standard conflicts the applicable law |
| ThePessimist | Members must *always* comply with local law. If the Code and Standards are stricter, you have to follow them too. But the answer won't be that you don't follow local law! (E.g., what if local law isn't "strict" but requires you to get a local securities license to do your job? You can't just ignore that law because the C&S are stricter.) |
| Adkins | quotes taken from Standard 1 (A) from the CFA Handbook 9th Ed. A is wrong because should comply with CFA Code and Standards if it is more strict - "in the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation" B is wrong because Country may have a standard that is less strict than CFA - as above Members and Candidates must comply with the local laws and the CFA Code. |
| TammTamm | This was tricky. I went back and forth between b and c, utlimately I chose the wrong one. |