Disassociate vs. Report Behavoir

CFA Level III Ethics
#1

Anyone have any guidelines for when someone should disassociate vs. report behavior?

Was doing the Kaplan Vol1 PM1 mock and question 4 has an example where a supervisor has executed trades in a manner not prudent to the account’s beneficiaries and potentially has executed trades not suitable or allowed by the account. The question asks what the subordinate should do in this instance.

The only two possible answers include disassociate or report to the regulatory authority.

I hate these type of CFA nonsense questions, you are never going to be able to “disassociate form you boss”

That being said is there any guidelines as to when reporting vs. disassociating is appropriate.

Thanks.

#2

I think you have to look at this from how the CFAI teaches and tests Ethics. Reporting to the regulatory authority is rarely, if ever, going to be the correct answer. Resolutions will almost always involve an internal solution of some kind, such as reporting the issue to a supervisor higher up the ladder (not an option in this question it seems) or disassociating from the activity if other internal resolution attempts fail, which could involve quitting your job (the ultimate way to disassociate from your boss) to do so.

#3

In real life - always disassociate. Try to avoid any kind of reporting someone. Might not be healthy especially in some countries.:slight_smile:

#4

I guess the only other specific thing would be if the problem states there is illegal activity, I believe CFA requires you to report anything illegal to authorities.

#5

If is illegal activity, there is not only Ethic dilemma. Upon many legislative, one must report illegal activity to Authorities because if not, he will be also suspected (eg. money laundering, terrorist financing). At the other hand by reporting such activity, one would take a risk of swimming in a river with block on his neck.

Shortly, since CFAI Codes requires to follow more strict legal rules, you should report illegal activities even if you break confidentiality by client relationship.

#6

#7

You are either an employee or a supervisor

employee disassociates; it’s supervisor’s responsibility to monitor control and avoid

reporting like mentioned is an external event triggered whether divulging violates confidentiality - if regulatory authority then always regulation trumps if conflicts with Cfa requirements.