Financial Risk Manager Part 1
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Donald Lee, FRM, is an exam proctor for the FRM part I exam. A few days before the exam, Lee emails a copy of 5 questions to each of his two friends, Martin and Joseph, who are part of the FRM program. Lee and his two friends had planned the distribution of exam questions months in advance. Martin proceeds to prepare for the exam. However, Joseph develops cold feet and declines to load the questions and use them to his advantage. Which of the following statements is most likely correct?
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A
Donald Lee violated the GARP Code of Conduct, but Martin and Joseph did not.
B
All the three violated the GARP Code of Conduct.
C
Donald Lee and Martin violated the code, but Joseph did not.
D
Martin and Joseph violated the code, but Donald Lee did not.
Explanation:
Explanation
All three individuals - Donald Lee, Martin, and Joseph - violated the GARP Code of Conduct for the following reasons:
Donald Lee's Violations:
- Breach of confidentiality: As an exam proctor, Lee had access to confidential exam materials and improperly shared them
- Professional misconduct: Distributing exam questions violates the integrity of the FRM certification process
- Conspiracy: The planning of this distribution months in advance demonstrates intentional misconduct
Martin's Violations:
- Receiving confidential information: Martin accepted and used the confidential exam questions
- Unethical preparation: He prepared for the exam using improperly obtained materials
- Complicity: Participated in the pre-planned scheme
Joseph's Violations:
- Receiving confidential information: Joseph accepted the exam questions via email
- Conspiracy: Was part of the pre-planned scheme to distribute exam questions
- Failure to report: Did not report the ethical violation when he received the confidential information
Key Points:
- Even though Joseph didn't use the questions, he still violated the code by:
- Accepting confidential information
- Being part of the conspiracy
- Failing to report the ethical breach
- The GARP Code of Conduct requires members to maintain confidentiality and report ethical violations
- All participants in an unethical scheme are responsible, regardless of whether they ultimately benefited
This case demonstrates that ethical violations occur not just through action, but also through participation in unethical schemes and failure to uphold professional standards.
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