Put the Knowledge of the Law standard, I(A), into practice
The idea
Members must understand and comply with all applicable laws, rules and regulations, including the Code and Standards, and must comply with the stricter of them where they differ. Where local law is less strict than the Code, the Code governs; where local law is stricter, local law governs. Members must not knowingly participate in a violation, and on discovering one must dissociate — which means leaving the activity, and may mean resigning. There is no affirmative duty to report to authorities under the Standard, though local law may impose one, and reporting internally while continuing to take part may still be treated as participation.
A practice question
When local law is less strict than the Code and Standards, which governs?
- The Code and Standards, as the stricter rule — correct
- Local law, because it has legal forceWhy not: Legal force is not the test under Standard I(A). A member follows whichever of the two is stricter, and here that is the Code.
- Neither, since the member may chooseWhy not: The Standard leaves no discretion. Where law and Code differ, the stricter of the two governs.
Standard I(A) Knowledge of the Law requires a member to comply with the stricter of applicable law and the Code and Standards. A permissive local rule does not lower the bar the member is held to.
A harder one
A member discovers that a colleague's activity violates the Standards. What does the Standard require?
- An immediate report to the securities regulatorWhy not: Standard I(A) requires dissociation, not notification. A reporting duty, where one exists, comes from local law rather than from the Code.
- Nothing, provided the member was not personally involvedWhy not: Continuing in an activity known to be a violation is itself knowing participation, whoever began it.
- Dissociation, which may mean leaving the employer — correct
Standard I(A) prohibits knowing participation in a violation and requires the member to dissociate. It does not itself create a duty to report to a regulator, though local law may.
The hardest tier
A member raises a suspected violation internally, is told the matter is handled, and the conduct continues while the member's team keeps earning fees from it. Is dissociation complete?
- Yes, because the member reported it internallyWhy not: An internal report is the first step rather than the whole of dissociation, and it does not end participation that continues after it.
- No, continuing to participate is still participation — correct
- Yes, provided the member documents the conversationWhy not: Documentation protects the member's account of events and changes nothing about what they are still taking part in.
Standard I(A) asks what the member is still part of. Raising the matter internally begins dissociation; remaining in the activity and continuing to earn from it is participation whatever was said.
In the app: 9 practice questions on this outcome, a narrated walkthrough with diagrams, spaced review that brings it back before you forget it.
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