Beneficial Ownership

C

The authority to supervise those below the member has no relation to the concept of "beneficial owner." Also, supervisory responsibility is covered under Standard

III (E).

According to Standard IV (B.4) of the CFA® Institute's Code of Ethics and Standards of Professional Conduct, a member is considered a "beneficial owner" if they possess certain characteristics. The term "beneficial owner" is used to determine the priority of transactions and the responsibilities associated with them. Let's examine each answer choice to identify the exception:

A. The power to vote or direct the voting of the shares of the securities or investments. This answer choice aligns with the characteristics of a beneficial owner. A member would typically be considered a beneficial owner if they have the authority to vote or direct the voting rights associated with the securities or investments. This power is an essential aspect of being a beneficial owner.

B. The power to dispose or direct the disposition of the security or investment. Similar to the previous answer choice, this characteristic is consistent with being a beneficial owner. Having the ability to dispose of or direct the disposition (sale, transfer, etc.) of the security or investment demonstrates ownership and control over the asset.

C. The authority to supervise reasonably and adequately the actions of those accountable to him. This answer choice represents the exception. According to Standard IV (B.4), having the authority to supervise reasonably and adequately the actions of those accountable to the member is not a defining characteristic of a beneficial owner. While this authority may be important for maintaining oversight and ensuring compliance, it does not directly relate to the concept of being a beneficial owner.

D. A direct or indirect pecuniary interest in the securities. Having a direct or indirect pecuniary interest in the securities is another characteristic that aligns with being a beneficial owner. A pecuniary interest implies a financial interest or stake in the securities, which signifies ownership and potential financial benefits.

In summary, the correct answer is C. The authority to supervise reasonably and adequately the actions of those accountable to the member is not a characteristic of a beneficial owner, according to Standard IV (B.4). The other three answer choices, A, B, and D, all represent attributes that are consistent with being a beneficial owner.