CMFAS RES 1A Ethics, Codes & Standards of Professional Conduct question: procedures for compliance set out

CMFAS RES 1AEthics, Codes & Standards of Professional Conduct

Which of the following are among the recommended procedures for compliance set out in the guides? (a) Appointing an officer to oversee compliance with the firm's code of ethics and the regulations covering its business. (b) Setting a value limit for acceptable gifts, whether per gift or as an annual aggregate. (c) Paying research analysts solely on the revenue their reports generate. (d) Running regular ethics and compliance training alongside the code of ethics. Which of the following are CORRECT?

A (a) and (c) only
B (a), (b), (c) and (d)
C (b) and (c) only
D (a), (b) and (d) only

Show the answer and explanation

Answer: D. (a), (b) and (d) only

RES 2B sections 5.4.2.4 to 5.4.2.7 and RES 1B section 4.4.2.3: appoint a compliance officer, limit gifts by value, train staff regularly, and design compensation so that it preserves the analyst's independence. Pay should reflect conduct standards, not business indicators alone. Takeaway: the pay design is a control, not a reward scheme.

Common mistake

Revenue-only pay is the behaviour these procedures exist to prevent.

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