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C. Responsibilities of Supervisors.
#analyst-notes #code-of-ethics-and-standards-of-professional-conduct #iv.-duties-to-employers
Example 1

A supervisor in an investment management firm concludes that since all five equity analysts working for her are CFA charterholders, she can trust them to refrain from violations of laws, regulations, and the Code and Standards. While she can trust them to refrain from such violations, this does not constitute reasonable supervision.

Example 2

You are offered a promotion to supervise all investment managers involved in discretionary trading. You are told that there have been instances of improper trading in some accounts and that at least one manager is likely performing additional investment services for several of his clients. However, the operation is highly profitable, so senior management has no immediate concern regarding these issues. You are responsible for prevention of violations of the Code and Standards. If there are known violations and little or no control over the investment process, you should decline the supervisory position until reasonable procedures can be established.

Example 3

A supervisor returns from a two-week vacation to find that one of his brokers has been making personal trades in advance of the release of analysts' reports to clients. If there are established reporting processes to monitor employee trading and a reasonable effort is made to evaluate the appropriateness of trades, then the supervisor has not violated this standard. However, if there is no reasonable monitoring process, the supervisor has violated this standard.

Example 4

A supervisor obtains a memo from an employee stating that all the portfolio managers should purchase a certain stock. He doesn't check the sources of the memo or anything else, disseminates the memo to all his portfolio managers and then leaves town. The price of the stock declines sharply. The supervisor is in contravention of this standard, since he was negligent and didn't check the memo prior to disseminating it.

Example 5

A supervisor/vice president of a large investment company changes her opinion on a specific stock from buy to sell. Prior to publishing the change of opinion, she informs all her colleagues (as is normal practice). Several of the employees sell the stock prior to the dissemination of the report to the public. The supervisor was negligent in the performance of her duties, as she should have ensured that there were procedures in place to ensure that no trading took place until the information was disseminated to the general public.
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