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Basic Question 1 of 4
You supervise five portfolio managers. One manager appears to be engaging in excessive trading in the portfolios he manages. While this manager is a CFA charterholder, your firm has no specific guidelines covering this activity.
B. Since the manager is a Charterholder, the Code and Standards substitute for your supervisory responsibilities.
C. You must take action to regulate this practice and work to establish a policy regarding such practices in the future.
A. You have met your supervisory obligations since the firm has no clear policy.
B. Since the manager is a Charterholder, the Code and Standards substitute for your supervisory responsibilities.
C. You must take action to regulate this practice and work to establish a policy regarding such practices in the future.
User Contributed Comments 8
| User | Comment |
|---|---|
| kaplan | There is no evidence of this, so you should establish a policy regarding such practice in the future |
| examcfa | Why is B not sufficient? Given that the manager is not doing anything illegal. Besides, excessive trading is relative. |
| 0is4eva | Since you supervise the portfolio managers, and since you are to follow the Code and Standards, you must: - understand what constitutes an adequate compliance system for this firm - make reasonable efforts to see that appropriate compliance precedures are established - make reasonable efforts that these procedures are monitored You should bring the inadequate compliance system to the attention of senior management. Members and candidates must apply their knowledge of the code and standards in discharging supervison, regardless of those supervised being CFA charterholders or not. |
| IIkDII | What's wrong with excessive trading and what determines excess ? |
| nayagan | In my opinion, the supervisor should not have accepted the position in the first place since it states "your firm has no specific guidelines covering this activity" |
| josie491 | Excessive trading may mean that portfolio managers are churning revenue from the client's trade. As each trade has a fee charged, excessive trading may mean more revenue for portfolio managers. This is what i think |
| JakeZ | I like the part "you supervise five portfolio managers" :) |
| sshetty2 | key word is excessive; if they are clearly trading excessively then action must be taken. |
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Colin Sampaleanu
Learning Outcome Statements
demonstrate a thorough knowledge of the Code of Ethics and Standards of Professional Conduct by applying the Code and Standards to specific situations;
recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct.
CFA® 2026 Level II Curriculum, Volume 6, Module 44.