Responsibilities of a Member with Supervisory Duties | CFA Level 1 Exam

Responsibilities of a Member with Supervisory Duties

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Question

Which of the following is NOT true about the responsibilities of a member with supervisory duties, as specified by Standard III (E) - Responsibilities of

Supervisors?

Answers

A. Compliance activities must be designed to anticipate the activities most likely to result in misconduct.

B. Compliance procedures must meet industry and regulatory standards.

C. The supervisor is always accountable for the violations committed by those who report to him.

D. If a member cannot discharge supervisory responsibilities due to an absence of compliance system, he or she should decline to accept the duties in writing till such a system is put into effect.

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Explanations

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A. B. C. D.

Under Standard III (E) - Responsibilities of Supervisors, members must take reasonable care to ensure that their subordinates do not violate any laws or the code of conduct. This includes designing effective procedures to deter fraudulent activity. If such procedures are reasonable, meet industry and regulatory standards, are compatible with the AIMR code and are suitable for the firm in question, then the member cannot be held responsible for criminal activity clever enough to bypass the compliance system. Occurrence of such activity does indicate a need for a revamping of the system, though.

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