What measures should an investment firm implement to prevent fraud?

Implementing robust compliance programs and regular auditing procedures is essential for an investment firm to prevent fraud. These measures create a structured framework that ensures adherence to legal and regulatory standards, thereby reducing the likelihood of fraudulent activities. A compliance program includes policies and training that promote ethical practices among employees, while regular audits help identify any discrepancies or irregularities in financial transactions.

By having these systems in place, the firm not only complies with regulatory expectations but also fosters a culture of accountability and transparency. Regular audits act as a check-and-balance mechanism that can detect potential fraud early on, enabling the firm to take corrective measures promptly before significant damage occurs. This proactive approach is crucial in maintaining the integrity of the firm's operations and protecting clients' interests.

Other options may seem relevant but do not address the comprehensive nature of fraud prevention as effectively as implementing strong compliance programs and auditing procedures. For instance, while hiring employees with no prior offenses is important, it doesn't guarantee that newly hired staff will operate with integrity, as fraud can occur even among individuals with clean backgrounds. Limiting client access to account information may enhance security but doesn't inherently prevent fraud, as it might only address symptoms rather than root causes. Moreover, reducing oversight of financial transactions creates opportunities for fraud to occur without detection