The SEC’s new stock-trading rule has just gone into effect. The SEC will give brokers a 10-day grace period, during which violators of the rule will be immediately notified and given a chance to remedy their situation to comply with the new rule. If a CFA Institute member unknowingly violates the rule and then remedies the situation within the 10-day grace period, has the member violated Standard I(A)? A) Yes, because breaking a rule of the SEC has no remedy for a member of CFA Institute. B) No, because the member remedied the situation. C) No, because the member unknowingly broke the rule. D) Yes, because the member did not maintain knowledge and know of the rule.
Since it is done unknowingly, and remedies before the grace NO violation. Ans B)
Whether knowingly of unknowingly, the member violates the rule. In my opinion, remedy is action after violation. So still violate. Choice A and B should be eliminated first. There is a chance for C. The standard IA states “do not knowingly participate”. However “knowingly participate” a violation is certainly not encouraged. D should be the best ans. The guidance states that member “must” knows the law. I vote D.
I would first think B - The SEC rule does give a 10-day grace period…so technically if it is remedied within that time then it’s not an absolute violation…even according to the SEC… However D also seems possible for the reasons pointed out by jogging above hmm…Leaning towards D
Anyone votes for C? As mentioned, since the new rule has “just into effect” and the broker “unknowingly violates” the rule, the broker doesn’t really break the rule. On the other hand, dont think the “remedies” save the broker from violating the rule if he actually did.
- This is a new rule. 2) Unknowingly violated. 3) Corrected within the grace period. Even SEC gave grace because the rule is new and there may be problems with interpretation. Otherwise why would they give grace period ? Also somewhere they said, one need not be expert in every law etc. only sufficient knowledge.
I say D, a member should keep up on the rules that governs their activities, it says it just went into effect not necessarily just sprung up on them.
oh god… what is the answer cfafs1??
D. good work for those of you who got it right… cfa is hardcore, know your rules. i also choose C and got it wrong.
Guessing C, but can see the arguments behind B and D as well.
I did this question, the answer is D!
CFAdummy, the official answer is D? Do you know what material this Q was from? Anyways, I’ll definitely schedule an extra couple of days for ethics review.
C Unknowingly.
i got this from schweser qbank. and the official answer was D
Here is the answer… Your answer: C was incorrect. The correct answer was D) Yes, because the member did not maintain knowledge and know of the rule. Standard I(A) explicitly says that a member shall maintain knowledge and comply with laws, rules, and regulations. By not knowing of the rule, the member broke the standard. If a CFA Institute member accidentally breaks a rule from a careless error and remedies the situation, this would not be a violation of Standard I(A), and so the “no remedy” response is not correct. This question tested from Session 1, Reading 2-I, LOS A.