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Basic Question 1 of 7
Smith works for an investment bank which is the principal underwriter for a client. As a member of the underwriting team, Smith discovers that the earnings per share in the client's income statement are overstated. However, the client's prospectus, which contains a condensed copy of financial statements, has already been distributed. What should Smith do?
User Contributed Comments 7
| User | Comment |
|---|---|
| kalps | Steps: 1) Report to the supervisor 2) Disassociate himself with the underwriting 2) Seek legal advice and rely on this as one would expect legal counsel to be competent |
| myfree | The case is where one "Knows" about a violation as opposed to "Feel" about a violation |
| yiivy3200 | Report his findings to the appropriate supervisory persons in the firm. If the matter is not remedied, he should sever all his connections with the under writing. Seek advice of the investment bank's general counsel. If he believes that the attorney is competent,he should follow the attorney's advice without material variation. |
| durikang | Firstly, escalate the right supervisor in his firm. Secondly, if this issue is not remedied, he should do his best on his role. If it is, he should disassociate this violation. |
| challenger24 | 1) report incident to supervisor 2) if th situation is RECTIFIED then a review of procedures should occur to ensre issue is not repeated. Another angle to ensure compliant business activities are maintained |
| rohits79 | if feels broken - talk to counsel if knows broken - talk to supervisor no one hears - disassociate i.e. leave the team/firm |
| vatsal92 | Report -> Disassociate -> Inform or seek legal advice |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity
recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct
identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards
CFA® 2024 Level I Curriculum, Volume 6, Module 3.