bapswarrior

Which of the following is a component of the Code of Ethics?

A) Members shall not knowingly participate or assist in any violation of such laws, rules, or regulations.

B) Members shall not engage in any professional conduct involving dishonesty, fraud, deceit, or misrepresentation or commit any act that reflects adversely on their honesty, trustworthiness, or professional competence.

C) Members shall use reasonable care and exercise independent professional judgment.

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This is a component of the Code of Ethics. Others pertain to the Standards of Professional Conduct.

bapswarrior

Which of the following is NOT part of the CFA Institute Code of Ethics. Members of CFA Institute will:

A) recommend investments that maximize returns for a given level of risk.

B) use reasonable care and exercise independent professional judgment.

C) strive to maintain and improve their competence and the competence of others in the profession.

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Standard of Professional Conduct III(C), not the Code of Ethics, requires that investments be appropriate and suitable.

bapswarrior

Which of the following is NOT part of the CFA Institute Code of Ethics. Members of CFA Institute will:

A) recommend investments that maximize returns for a given level of risk.

B) use reasonable care and exercise independent professional judgment.

C) strive to maintain and improve their competence and the competence of others in the profession.

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Standard of Professional Conduct III(C), not the Code of Ethics, requires that investments be appropriate and suitable.

bapswarrior

Liam McCoy has lunch with a wealthy client whose portfolio he manages. McCoy advises the client to double his current position in the JKM Corporation due to an anticipated increase in sales. In accordance with Standard (V) Investment Analysis, Recommendations and Actions, when McCoy returns to his office he should:

A) identify other clients for whom JKM may be a suitable investment and notify them immediately of his recommendation.

B) document the details of the conversation with the client with regard to his investment recommendation.

C) verify the suitability of the investment recommendation before placing the client’s order.

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Standard V(C) Record Retention requires that Members and Candidates document all recommendation and communications with clients. McCoy should document the details of the conversation, including any resulting investment decisions and/or actions. The suitability of the investment should have already been considered before the recommendation and McCoy should not execute the order until the client instructs him to. Identifying other clients for this investment would fall under Standard III(B) Fair Dealing.

bapswarrior

Michael Malone, CFA, is an investment analyst for a large brokerage firm in New York who covers the airlines industry. After hours in his personal time, Malone maintains an online blog on which he expresses his personal opinions about various investment opportunities, including, but not limited to, the airlines industry. On his blog, he posts a very negative investment opinion about WestAir stock. Malone knows that WestAir's stock will be downgraded to a “sell” by his firm next week. Malone has:

A) violated Standard IV(A) Loyalty by divulging confidential information that is the intellectual property of his employer.

B) violated Standard VI(B) Priority of Transactions by releasing material information to the public before releasing to the firm’s clients.

C) violated Standard II(A) Material Nonpublic Information by releasing material that could negatively impact the price of the security.

Malone is in violation of Standard II(A) because the information is both material and nonpublic. He is in violation whether or not he divulges the impending downgrade by his firm on his blog, because he is using nonpublic information. A “sell” opinion on a security issued by a large brokerage firm will almost certainly impact the stock’s price.

bapswarrior

Which of the following activities would be following a component of the Code of Ethics explicitly?

A) Consulting with colleagues about opinions you reach in your research.

B) Attending continuing education seminars on investing and inviting colleagues to come along.

C) Maintaining a list of colleagues who have violated the CFA Institute standards.

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The Code states that a member shall “Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.” None of the other answers qualify.

bapswarrior

According to the Standards of Professional Conduct, investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner. This concept is most directly addressed in:

A) Standard VI, Conflicts of Interest

B) Standard V, Investment Analysis, Recommendations, and Actions

C) Standard I, Professionalism

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Standard VI(B) addresses priority of transactions, and states that “Investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner.”

bapswarrior

In accordance with Standard III (A) Loyalty, Prudence and Care, which of the following statements is least accurate? Members and Candidates should:

A) utilize client brokerage to the sole benefit of the client.

B) submit to clients, at least quarterly, itemized statements detailing all of the period’s transactions.

C) vote all proxies on behalf of clients in a responsible manner.

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Because of the time and expense involved in voting a proxy, Members and Candidates are not required to vote every proxy. A cost benefit analysis can be performed to determine if it is necessary to vote a proxy.

bapswarrior

The first component of the Code of Ethics does NOT explicitly say that a CFA Institute member will act in a certain manner with respect to which of the following groups?

A) Colleagues in the investment profession.

B) The SEC.

C) The public.

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The SEC is not mentioned in the Code of Ethics. Component one mentions duties to the public, clients, prospects, employers, employees, colleagues, and other participants in the global capital markets.

bapswarrior

Which of the following is NOT part of the CFA Institute Code of Ethics?

A) Independent judgment.

B) Competence.

C) Contractual provisions.

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Contractual provisions are not part of the Code of Ethics.