According to the CFA Institute Standards, what happens if an analyst is aware of a legal violation?

The correct answer emphasizes the ethical obligations that analysts have when they become aware of a legal violation. Under the CFA Institute Standards, when an analyst is aware of a legal breach, they are expected to take appropriate action. This responsibility reflects the importance of maintaining integrity and ethical conduct within the industry.

The understanding here is that analysts cannot simply turn a blind eye to illegal activities. If they fail to act upon their knowledge of such violations, they may face penalties because they are seen as complicit in the situation. The expectation is that professionals who are aware of misconduct have a duty to either report it or take steps to mitigate it, thereby upholding the credibility and ethical standards of the profession.

The other options suggest varying degrees of non-responsibility or neutrality that do not align with the CFA Institute's emphasis on proactive ethical conduct. For example, stating that they are not held accountable simply because they did not instigate the violation undermines the collective responsibility analysts carry to uphold legal and ethical standards in their work environment.