CFA Practice Question

CFA Practice Question

Standard IV (C) - Responsibilities of Supervisors points out that when violations do occur, ______ procedures may be inadequate.
A. compliance
B. legal
C. fiduciary duty
Explanation: If a member has adopted reasonable procedures and taken steps to institute an effective compliance program, then the member may not be in violation of Standard IV (C). The fact that violations do occur may indicate, however, that the compliance procedures are inadequate. Furthermore, a member may be in violation of Standard IV (C) if he or she knows that the procedures designed to detect and prevent violations are not being followed.

User Contributed Comments 4

User Comment
mallang y not answer B is a right choice?
karobharshal Legal procedures are not for stopping something, they are for actions to be taken after the activity (when some one commits a crime Legal system did not fail, but if he goes unpunished then that would be a failure of legal system).
Compliance are kind of restrictions for wrong doings.
moneyguy The question states, "WHEN violations DO occur...". The violation has already happened, so how do compliance procedures help with this? Seems like it would become a legal issue.
harrybay No it's because the violation might have happened because of weak compliance procedures. What they mean is that when violations happen, it might be a sign that the compliance procedures are flawed.
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