CSCP Ethics & Professional Responsibilities 2

Question 1

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?

Accepted Answer

Report the violation through proper internal channels regardless of the manager's revenue contribution

Answer

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.

Question 2

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?

Accepted Answer

Placing client interests ahead of personal and employer interests when making investment decisions

Answer

Loyalty, Prudence, and Care requires placing client interests above those of the professional's own firm and personal benefit.

Question 3

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?

Accepted Answer

$100

Answer

FINRA Rule 3220 limits gifts to $100 per person per year to prevent conflicts of interest in client relationships.

Question 4

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?

Accepted Answer

Independence and objectivity of research

Answer

Pressure to change research opinions to serve investment banking relationships directly violates the analyst's duty to maintain independent and objective analysis.

Question 5

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:

Accepted Answer

Conduct a reasonable preliminary inquiry to assess the credibility of the allegation

Answer

Ethical compliance practice requires a reasonable preliminary investigation to determine whether a credible allegation warrants escalation, rather than dismissing or prematurely escalating tips.

(CSCP) Certified Securities Compliance Professional Practice Test

(CSCP) Certified Securities Compliance Professional Practice Test

CSCP Ethics & Professional Responsibilities 2