Explanation:
The fund manager violated Profession Integrity and Ethical Conduct Code 1.7. GARP Members "shall be mindful of cultural differences regarding ethical behavior and customs, and avoid any actions that are, or may have the appearance of being unethical according to local customs. If there appears to be a conflict or overlap of standards, the GARP Member should always seek to apply the highest standard."
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Question 81
A U.S. hedge fund manager is dealing largely with overseas investments. In the past six months, he was able to generate excess alpha by incorporating a strategy that was valid based on U.S. strategies. Local customs prohibited overseas traders from making trades during the same time intervals. Has the fund manager violated the GARP Code of Conduct?
A
No, since U.S. standards were upheld, and he is accountable to the standards of his local ordinances.
B
Yes, he should seek the higher local standards when there is a conflict.
C
No, there is no evidence of any violation related to illegal trading, only a difference based on international codes, which is acceptable.
D
Yes, he did not indicate the accuracy of the performance and is potentially overstating future expected returns based on strategies that are unlikely to be obtainable in the future.
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