Ethics & Professional Responsibilities Flashcards
7 cards from real CSCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Ethics & Professional Responsibilities flashcards as text
A compliance officer discovers that their firm's star portfolio manager has been front-running client orders. The manager generates 40% of the firm's revenue. What is the compliance officer's primary obligation?
Answer: Report the violation through proper internal channels regardless of the manager's revenue contribution
A compliance officer's duty to report violations is not contingent on the economic importance of the violator; client protection and regulatory compliance take precedence.
Under the CFA Institute Code of Ethics, which action best demonstrates the standard of 'Loyalty, Prudence, and Care' when managing a client's retirement portfolio?
Answer: Placing client interests ahead of personal and employer interests when making investment decisions
Loyalty, Prudence, and Care requires placing client interests above those of the professional's own firm and personal benefit.
A registered representative receives a gift worth $150 from a client after completing a complex estate planning transaction. FINRA rules generally cap gifts from clients at which threshold per year?
Answer: $100
FINRA Rule 3220 limits gifts to $100 per person per year to prevent conflicts of interest in client relationships.
A securities analyst has been asked by their employer to change a 'sell' recommendation to 'hold' because the issuer is a major investment banking client. Which ethical principle is most directly at stake?
Answer: Independence and objectivity of research
Pressure to change research opinions to serve investment banking relationships directly violates the analyst's duty to maintain independent and objective analysis.
A compliance professional learns of a potential securities law violation from an anonymous tip but lacks sufficient evidence to confirm it. The most appropriate next step under professional ethics standards is to:
Answer: Conduct a reasonable preliminary inquiry to assess the credibility of the allegation
Ethical compliance practice requires a reasonable preliminary investigation to determine whether a credible allegation warrants escalation, rather than dismissing or prematurely escalating tips.
Which of the following scenarios best illustrates a conflict of interest that must be disclosed to clients under securities industry ethics standards?
Answer: An advisor recommends a fund in which their spouse holds a significant ownership interest
A family member's financial interest in a recommended security creates a material conflict of interest that must be disclosed to clients.
Under SEC whistleblower rules, which statement is accurate regarding retaliation protections for securities compliance professionals?
Answer: Employees who report potential securities violations internally may still qualify for anti-retaliation protections
Following the Supreme Court's decision in Digital Realty Trust v. Somers, Dodd-Frank anti-retaliation protections primarily require SEC reporting, but internal reporters may still have protections under specific circumstances and other statutes.