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　　1.The Investment Banking Department of MLB&J often receives material nonpublic information that could have considerable value to MLB&J's brokerage clients. To comply with the GARP Code of Conduct, MLB&J should most appropriately:
　　A. restrict proprietary trading in the securities of companies about which the Investment Banking Department has access to material nonpublic information.
　　B. ensure that material nonpublic information is not disseminated beyond the firm's investment banking, brokerage, and research departments.
　　C. contact the firms involved and request that they make this information available to the public before MLB&J allows its clients to trade in these securities.
　　D. prohibit MLB&J analysts from making buy or sell recommendations on this information until ten business days after the receipt of this information.
　　2.Information systems at Barings Bank were deficient for all of the following reasons EXCEPT:
　　A. management’s failure to audit reporting quality.
　　B. technological limitations that hindered accurate financial reporting.
　　C. incomplete account information on gains and losses.
　　D. management’s inability to detect the inconsistency of Leeson’s trading strategy and profits.
　　3.Reduction of risks not under management’s control:
　　A. may cause managers to overinvest.
　　B. makes stock options more valuable.
　　C. cannot improve management incentives.
　　D. can lead to lower incentive compensation.
　　Answer:
　　1.A
　　According to Standard 1.3, GARP members must take reasonable precautions to ensure that Member's services are not used for improper, fraudulent or illegal purposes.
　　2.B
　　The Barings collapse did not result from technological limitations. Management is responsible for auditing and ensuring the quality of the information it receives. Barings management failed to do so and received information without questioning it. Reports contained incomplete account information on gains and losses. Management also failed to detect a signal that something might be wrong in that the size of Leeson’s reported profits were inconsistent with and out of proportion to the trading strategy he was supposedly using. Technological limitations were not an issue in the Barings case.
　　3.D
　　When the uncertainty about firm performance that is not a result of management decisions and actions is reduced, incentive compensation for management is a less-risky source of compensation for managers, and they will accept a contract with lower expected incentive compensation as a result.