Question on Ethics: can you say John violated standard if he has nothing to do with it?

This is pretty silly and tricky and simple.

John is neither a member nor a candidate. His firm does not adopt any CFAI standard and his superviser is not member or candidate. However, John’s conduct is in violation if he was a member or candidate. Since John is not subject to CFAI standard, can we say he violated CFAI standard? I hate to anser yes or no on this. But on the ethics text it seems that the verdict is that John violated the standard even though he has nothing to do with the standard.

IMO he has violated the standard but he’s not obligated to comply or subject to any consequences resulting from it, unless what he did is againsting the law. So yes, he has violated the CFAI standard.

Think of John as a student at high school A. He is not obligated to comply to rules at high school B unless he is part of it or within high school B’s properties.

The Code and Standards apply to covered persons (it should be “people”, but that’s another matter): charterholders, candidates, and members of CFA Institute.

They don’t apply to anyone or anything else.

Anyone who or anything that is not a covered person cannot violate the C&S.


Magician’s answer makes more sense to me and I kind of think that way.

In the book many examples would show that John is in violation. Maybe in the book somewhere it assumed all persons in the book are “covered persons”. But I do not remember if the standard and ethics book assumed that. If somwbody is sure of such kind of assumption please list the page #.

Suppose there is a law in Ohio that states a man is not allowed to wear pants, period.

John lives in England and wears pants all the time. Has John violated Ohio law?

Yes, John has violated Ohio State Law, even though he is not subject to Ohio State Law. If Ohio added the provision to the law that men cannot wear pants within Ohio then John would be exempt but this is not the case.

The law itself does not apply to John, but I believe symmantically you can still violate a law that doesn’t apply to you.

For the exam, I would assume everyone is a covered person unless explicitly stated.

I’m going with this answer. I was thinking on the same lines but couldn’t think of a good example. I was thinking of soccer rules being violated by fans in the stands but the anology didn’t quite stack up. No pants in Ohio is perfect.

Very interesting. I guess CFAI should clear this out. I agree it would assume all persons in the text book and in exam are covered persons.

Say a taxi driver overheard the two passenger guys talk about Apple stock in a way that he can tell they are top management and they explicitly said the sales much better than expected. The taxi driver called his broker to buy in Apple as soon as he droped the two guys at Apple headquarter. Is the taxi driver violated CFAI standard?

4 questions: 1) Is the taxi driver part of the CFA curriculum/charterholder? 2) Are the two passengers part of the CFA program/charterholder? 3) Top management of which company? Apple Inc.? 4) Is the info. regarding the expected sales already available to the public, assuming it is potentially material?

Scenario 1: In the case where the taxi driver is a charterholder and the info is still private, then obviously he has violated the CFAI Standard for insider trading (not due diligence b/c he is trading on his own portfolio).

Scenario 2:The two passengers are the management of Apple Inc. and they are CFA charterholder. Violated.

Scenario 3: None of them are charterholders. Not violated. I still remember couple similar ethic questions I did in level 1, and they all had one common: Anything outside the subject of CFAI Standard won’t be considered as a “violation”. They are subjected to the local/country law instead.