The Question: According to the CFA Institute Standards of Professional Conduct, Standard I(A), Knowledge of the Law, members shall not knowingly participate or assist in any violations of laws, rules, or regulations. An analyst: The Correct Answer: is held responsible for participating in illegal acts when the law is evident to anyone knowing the law and can participate in a violation by having knowledge of the violation and taking no action to stop it or disassociate from it. The Explaination: If you suspect someone is planning or engaging in illegal activities, you should: 1. Determine the legality of the activities. Consult your supervisor and legal counsel. 2. Take appropriate action. Disassociate, attempt to persuade the perpetrator to stop. CFA Institute does not require you to report them to the authorities, but the law might. I don’t understand how this answer is possibly correct. I understand that you are held responsible for knowing the law so you are violation if the law is available to anyone. The part that doesn’t make sense is when the answer says, “and can participate in a violation by having knowledge of the violation and taking no action to stop it or disassociate from it.” How can you participate in the violation by having knowledge of it and take no action to dissociate from it? Maybe I am reading the question and answer incorrectly, but that looks like a blatant violation of Standard I(A). - Eric
That’s just the rules. If you know something illegal is going on, you need to step in and do something. Imagine if you were working for a company and your colleague was laundering money. You knew for a fact that he was doing this. And you just sit there. According to CFAI, allowing it to happen is the equivalent of doing it yourself as well. I don’t see how this violates Standard I(A). I(A) says you have to have knowledge of the law. Having knowledge will enable you to detect such situations and know what’s legal and illegal.