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Basic Question 5 of 8
Which one of these four statements is not consistent with the recommended procedures for compliance?
B. Prior approval must be obtained for the personal investment transactions of all employees.
C. Pursuant to privacy of information laws, personal transactions will not be compared to those of customers, clients, and the employer unless requested by regulatory organizations.
D. Personal transactions for the purpose of these compliance procedures are limited to the employee and members of his or her immediate family and transactions involving a beneficial interest.
A. Investment recommendations may be changed by an analyst without prior approval of a supervisory analyst.
B. Prior approval must be obtained for the personal investment transactions of all employees.
C. Pursuant to privacy of information laws, personal transactions will not be compared to those of customers, clients, and the employer unless requested by regulatory organizations.
D. Personal transactions for the purpose of these compliance procedures are limited to the employee and members of his or her immediate family and transactions involving a beneficial interest.
User Contributed Comments 9
| User | Comment |
|---|---|
| stefdunk | D should include discretionary accounts |
| hagi10 | And market making |
| danlan | A: recommendations need to be notified to client before, but not approval of a supervisory analyst. |
| sunilcfa | I think it is ok for non material changes, but needs to be approved by supervisdor if material |
| rethan | Does personal approval need to be obtained for by all employers before a transaction? Say for example I am working as a receptionist for an IB.The company is underwiting a stock offering for a company that I own.I have absolutely no access to information regarding the underwriting transaction or any material non public info about the company. Do I have to seek approval before I trade this stock? My thinking on this is yes as the company would want to mitigate the APPEARENCE of conflict. Any comment regarding my line of thinking? |
| dblueroom | I believe even as a receptionist, you need to disclose all holdings to the employer. B is a bit extreme, usually there is a list of resticted investments you shouldn't be trading (firm specific). However, personal trades must be reviewed periodically. Probably B refers to trading the same securities that you do for clients. |
| joywind | key word in the question: Recommended. Therefore, A&B are fine. |
| johntan1979 | Agree with dblueroom. It's ridiculous to disclose all your personal investment activities that do not conflict with your company's interests. |
| hks101 | Employees may not know whether their trades conflict with the company's interest. Had a company adopted a policy that relied on employee to voluntarily regulate their own investment transactions based on their proposed knowledge or lackof would not be a strong policy. For example, say the receptionist is buying a stock the company representing in a M&A. The receptionist may not know that. However information may leak. Hence, all trading requires preclearance. |
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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® 2025 Level I Curriculum, Volume 6, Module 3.