Which of the following statements clearly conflicts with the recommended procedures for compliance presented in AIMR's Standards of Practice Handbook?
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A. B. C. D.C
This question deals with the compliance procedures relating to personal investments of members. Employees should compare personal transactions of employees with those of clients on a regular basis, regardless of the existence of a regulatory organization. Such comparisons ensure that members' personal trades do not conflict with their duty to their clients. All the other statements do not conflict with the procedures in the Handbook.
The question you provided seems to be related to the CFA® Level 1 exam and the AIMR's (Association for Investment Management and Research) Standards of Practice Handbook. However, it's important to note that the CFA® program and its curriculum are subject to change, and I cannot access the specific content of third-party providers like "Test Prep." Therefore, I can provide a general explanation of the concepts involved, but I cannot guarantee that it aligns exactly with the content of the exam you mentioned.
In general, the AIMR's Standards of Practice Handbook outlines the ethical and professional conduct expected from investment professionals. It provides guidance on various aspects of investment practice, including compliance procedures and personal investment transactions. Let's analyze each answer choice in relation to the recommended procedures for compliance:
A. Investment recommendations may be changed by an analyst without prior approval of a supervisory analyst. This statement conflicts with the recommended procedures for compliance. In most cases, investment recommendations should go through an approval process by a supervisory analyst or authority to ensure proper oversight and mitigate potential conflicts of interest. Allowing analysts to change recommendations without prior approval could undermine the integrity of the investment process.
B. Prior approval must be obtained for the personal investment transactions of all employees. This statement aligns with the recommended procedures for compliance. Requiring employees to obtain prior approval for their personal investment transactions helps to identify potential conflicts of interest and ensure that personal transactions do not interfere with their professional duties. It allows for monitoring and supervision of personal investment activities.
C. For confidentiality reasons, personal transactions should not be compared with those of clients or the employer unless requested by regulatory organizations. This statement does not necessarily conflict with the recommended procedures for compliance. Confidentiality is an important aspect of handling personal transactions, and ordinarily, personal transactions should not be compared with those of clients or the employer unless there is a specific reason to do so. However, if requested by regulatory organizations during an investigation or audit, such comparisons may be necessary to ensure compliance.
D. Personal transactions should be defined as including transactions in securities owned by the employee and members of his or her immediate family and transactions involving securities in which the employee has a beneficial interest. This statement aligns with the recommended procedures for compliance. Defining personal transactions to include securities owned by the employee and their immediate family, as well as transactions involving securities in which the employee has a beneficial interest, is a common practice. It ensures that personal transactions are not limited to the employee alone but also encompass related parties who may have a direct or indirect influence on the employee's investment decisions.
In summary, option A clearly conflicts with the recommended procedures for compliance because it suggests that investment recommendations can be changed by an analyst without prior approval. Options B, C, and D are generally in line with the recommended procedures, as they promote the need for prior approval of personal investment transactions, respect confidentiality, and provide an appropriate definition of personal transactions.