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Answer: report his suspicions to his supervisor.
## Explanation Under the CFA Institute's Code of Ethics and Standards of Professional Conduct, Standard I(A): Knowledge of the Law requires members to understand and comply with applicable laws, rules, and regulations. When a member suspects a violation of securities laws or regulations, they have an obligation to take appropriate action. **Key points:** 1. **Front-running or trading ahead of research reports** is a serious violation that could involve insider trading or other securities law violations. 2. **Fernandez's responsibility**: As a CFA charterholder, he has an obligation to address suspected violations. 3. **Appropriate action**: The correct course is to report the suspicions to his supervisor or compliance department, not to continue observing or discussing with other analysts. 4. **Why not B or C**: - **Option B (continue to observe)**: This is insufficient and could be seen as complicity if he fails to report ongoing violations. - **Option C (discuss with other analysts)**: This could compromise any investigation and potentially spread confidential information. **Correct approach**: Report to supervisor/compliance, who can then investigate properly while maintaining confidentiality and following proper procedures.
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Jorge Fernandez, CFA, is an equity analyst at a brokerage company. He suspects his colleague is trading on shares prior to his research reports being distributed to clients. When Fernandez asks his colleague about it, he is told to mind his own business. To comply with the Standard relating to knowledge of law, Fernandez should most likely.
A
report his suspicions to his supervisor.
B
continue to observe his colleague's trades.
C
discuss his colleague's trades with other analysts at the firm.
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