[2008 CFA level 2模拟真题]Version 2 Questions－1 ~ Q1-6 level, style, black, class

bingning

1、Trendwise Case Scenario

Trendwise is an investment firm offering a variety of mutual funds, including the Omega Fund. Omega has a large ownership stake in Cyclical Industries (CI). Omega and CI have one director in common, Glenn Libra. At the April Omega board meeting, portfolio manager Ileana Natali, CFA, stated that after conducting thorough research and analysis, she was firmly convinced that the fund should sell its shares of Cyclical Industries. Director Bruce Hall advised Natali, "Don’t sell Cyclical. It’s a great stock, isn’t it, Mr. Libra?” Libra listened but did not respond.

Hearing Hall’s comment, Natali decided not to sell the shares as planned. In the weeks that followed, the stock price rose dramatically. One month later, Libra phoned Natali, requesting that she vote Omega’s shares to re-elect him to the CI board of directors. Natali then sent Libra an email, saying, "I voted Omega’s shares for you, a step that I feel is in the best interest of our fundholders.”

Natali continued, "Please be aware that we recently conducted a cost-benefit analysis and determined that it is not worthwhile to vote all proxies. We are sending all clients a copy of our new proxy-voting policies, which will explain that in the future we may not vote all proxies.”

Libra warned, "Voting proxies is an integral part of the management of investments. A fiduciary who fails to vote proxies may violate CFA Standards.” In response, Natali agreed to consult counsel and the CFA handbook regarding the new policies.

The following week, Natali turned her attention to another project. Trendwise claims compliance with the CFA Institute Soft Dollar Standards and Natali’s supervisor had asked her to evaluate a proposal from Brock Securities, a brokerage firm that recently proposed a soft dollar arrangement. In her evaluation, Natali noted that Brock proposes a higher commission rate than Trendwise currently pays its present brokerage firm, that Brock’s higher fees are within a reasonable range, and that Brock could possibly provide better trade execution than Trendwise’s present broker. Natali proposes to use Brock on a trial basis. In a memorandum to Trendwise’s compliance officer, she states:

"I believe that the proposed arrangement satisfies the two fundamental principles in CFA Institute Soft Dollar Standards that Trendwise must use in evaluating soft dollar arrangements:

Principle 1: All client commissions paid to a broker are the property of the client.

Principle 2: Investment managers have a duty to disclose, to clients, the services or products obtained using soft dollar arrangements.

I recommend that we use Brock only for the transactions of Omega. This will allow us to verify the quality of Brock’s trade execution, and the soft dollar credits will decrease the research costs to Omega’s fundholders. After a one-year trial period, we will inform our directors of this new arrangement and report the results of the arrangement. If the directors decide to renew the contract, we will inform the fundholders. I expect that everyone will be very pleased.

Natali’s supervisor was so pleased with her work on the Soft Dollar project that the following week he had another project for her. He sent her a memo asking if the following firm policies need to be updated to comply with the CFA Institute Research Objectivity Standards:

1.            Base compensation for analysts is based on the quality of research performed. Year-end bonuses may be adjusted      based on an analyst’s work with investment banking and corporate finance teams.

2.            In their relationships with corporate issuers, analysts are prohibited from either directly or indirectly promising favorable reports or specific price targets or threatening negative reports.

3.            In their relationships with corporate issuers, analysts are prohibited from sharing with or communicating to a subject company, prior to publication, any section of a research report.

 Question 1

In their discussion of the new proxy voting policy, are the statements made by Natali and Libra consistent with CFA Institute Standards?

	Statements by Natali?	Statements by Libra?
A.	No	No
B.	No	Yes
C.	Yes	No
D.	Yes	Yes

A. Answer A.

B. Answer B.

C. AnswerC.

D. Answer D.

 
Question 2

Which aspect of Trendwise's duty to its clients is most likely to be violated by its proposed soft dollar arrangement with Brock?

A. All soft dollar practices must be fully disclosed.

B. Investment managers must at all times seek best trade execution.

C. Commissions paid must be reasonable in relation to the research and execution services provided.

D. Goods and services purchased with soft dollars must directly benefit the client or assist the manager in the investment decision-making process.

 
Question 3

In her statement about evaluating soft dollar arrangements, is Natali correct with respect to:

	Principle 1?	Principle 2?
A.	No	No
B.	No	Yes
C.	Yes	No
D.	Yes	Yes

A. Answer A.

B. Answer B.

C. Answer C.

D. Answer D.

 
Question 4

In response to Natali's supervisor's question regarding the firm's policies on research objectivity, Natali's best response would be:

A. Both policies 1 and 2 are consistent with the current Standards.

B. Both policies 1 and 2 are inconsistent with the current Standards and require changes.

C. The policy on analyst compensation requires changes, but the policy regarding relationships with corporate issuers is consistent with current Standards.

D. The policy regarding relationships with corporate issuers requires changes, but the policy on analyst compensation is consistent with current Standards.

 
Question 5

To make the third policy statement consistent with CFA Institute Research Objectivity Standards, Natali should suggest the following:

A. Leave the statement as it is.

B. Omit the statement entirely.

C. Add the phrase "that might communicate the research analyst's proposed recommendation, rating, or price target."

D. Add the phrase "without first seeking and receiving written approval from the firm's compliance department."

 
Question 6

In response to Natali's supervisor's question regarding the firm's policies on research objectivity, Natali's best response would be:

A. Both policies 1 and 2 are consistent with the current Standards.

B. Both policies 1 and 2 are inconsistent with the current Standards and require changes.

C. The policy on analyst compensation requires changes, but the policy regarding relationships with corporate issuers is consistent with current Standards.

D. The policy regarding relationships with corporate issuers requires changes, but the policy on analyst compensation is consistent with current Standards.

bingning

 Question 1

In their discussion of the new proxy voting policy, are the statements made by Natali and Libra consistent with CFA Institute Standards?

	Statements by Natali?	Statements by Libra?
A.	No	No
B.	No	Yes
C.	Yes	No
D.	Yes	Yes

A. Answer A.

B. Answer B.

C. AnswerC.

D. Answer D.

 
Correct answer = D

Standards of Practice Handbook, 9^th edition (CFA Institute, 2005), p. 55
Standards I-VII
2008 Modular Level II, Vol. 1, Reading 2, p. 50
Study Session 1-2-a
demonstrate a thorough knowledge of the Code of Ethics and Standards of Professional Conduct by applying the Code and Standards to specific situations
According to Standard III (A) Duties to Clients: Loyalty, Prudence, and Care, voting proxies is an integral part of the management of investments and a fiduciary who fails to vote proxies may violate the Standard. The Standards of Practice Handbook also states that a cost-benefit analysis may show that voting all proxies may not benefit the client, so voting proxies may not be necessary in all instances. 

Question 2

Which aspect of Trendwise's duty to its clients is most likely to be violated by its proposed soft dollar arrangement with Brock?

A. All soft dollar practices must be fully disclosed.

B. Investment managers must at all times seek best trade execution.

C. Commissions paid must be reasonable in relation to the research and execution services provided.

D. Goods and services purchased with soft dollars must directly benefit the client or assist the manager in the investment decision-making process.

 
Correct answer = A

CFA Institute Soft Dollar Standards
2008 Modular Level II, Vol. 1, Reading 3, pp. 128-129
Study Session 1-3-b
critique company soft dollar practices and policies
According to CFA Institute Soft Dollar Standards, once a manager decides to use soft dollar services, the manager should fully disclose to its clients its brokerage commission policies. Trendwise proposes to inform clients only at year's end. 

Question 3

In her statement about evaluating soft dollar arrangements, is Natali correct with respect to:

	Principle 1?	Principle 2?
A.	No	No
B.	No	Yes
C.	Yes	No
D.	Yes	Yes

A. Answer A.

B. Answer B.

C. Answer C.

D. Answer D.

 
Correct answer = C

CFA Institute Soft Dollar Standards
2008 Modular Level II, Vol. 1, Reading 3, pp. 125-126
Study Session 1-3-a
define "soft dollar" arrangements and state the general principles of the Soft Dollar Standards
Natali states Principle 1 correctly and Principle 2 incorrectly. According to CFA Institute Soft Dollar Standards, the first principle is that brokerage is the property of the client. The second fundamental principle states that investment managers have an ongoing duty to ensure the quality of transactions effected on behalf of its Client, including seeking to obtain Best Execution; minimizing transaction costs, and using Client Brokerage to benefit Clients. 

Question 4

In response to Natali's supervisor's question regarding the firm's policies on research objectivity, Natali's best response would be:

A. Both policies 1 and 2 are consistent with the current Standards.

B. Both policies 1 and 2 are inconsistent with the current Standards and require changes.

C. The policy on analyst compensation requires changes, but the policy regarding relationships with corporate issuers is consistent with current Standards.

D. The policy regarding relationships with corporate issuers requires changes, but the policy on analyst compensation is consistent with current Standards.

 
Correct answer = B

"CFA Institute Research Objectivity Standards" (AIMR, 2003; adapted 2005)
2008 Modular Level II, Vol. 1, Reading 4, p. 146
Study Session 1-4-b
critique company policies and practices related to research objectivity and distinguish between changes required and changes recommended for compliance with the Research Objectivity Standards
According to CFA Institute Research Objectivity Standards, firms must establish and implement salary, bonus, and other compensation for analysts that do not directly link compensation to investment banking or other corporate finance activities on which the analyst collaborated (either individually or in the aggregate). The Standards also state that research analysts are prohibited from directly or indirectly promising a subject company or other issuer a favorable report or specific price target, or from threatening to change reports, recommendations, or price targets. 

Question 5

To make the third policy statement consistent with CFA Institute Research Objectivity Standards, Natali should suggest the following:

A. Leave the statement as it is.

B. Omit the statement entirely.

C. Add the phrase "that might communicate the research analyst's proposed recommendation, rating, or price target."

D. Add the phrase "without first seeking and receiving written approval from the firm's compliance department."

 
Correct answer = C

"CFA Institute Research Objectivity Standards" (AIMR, 2003; adapted 2005)
2008 Modular Level II, Vol. 1, Reading 4, pp. 146, 150
Study Session 1-4-b
critique company policies and practices related to research objectivity and distinguish between changes required and changes recommended for compliance with the Research Objectivity Standards
According to CFA Institute Research Objectivity Standards, analysts must be prohibited from sharing with, or communicating with or communicating to a subject company, prior to publication, any section of a research report that might communicate the research analyst's proposed recommendation, rating, or price target. It is recommended that the compliance or legal department receive a draft research report before sections are shared with the subject company. 

Question 6

In response to Natali's supervisor's question regarding the firm's policies on research objectivity, Natali's best response would be:

A. Both policies 1 and 2 are consistent with the current Standards.

B. Both policies 1 and 2 are inconsistent with the current Standards and require changes.

C. The policy on analyst compensation requires changes, but the policy regarding relationships with corporate issuers is consistent with current Standards.

D. The policy regarding relationships with corporate issuers requires changes, but the policy on analyst compensation is consistent with current Standards.

Correct answer = B

"CFA Institute Research Objectivity Standards" (AIMR, 2003; adapted 2005)
2008 Modular Level II, Vol. 1, Reading 4, p. 146
Study Session 1-4-b
critique company policies and practices related to research objectivity and distinguish between changes required and changes recommended for compliance with the Research Objectivity Standards
According to CFA Institute Research Objectivity Standards, firms must establish and implement salary, bonus, and other compensation for analysts that do not directly link compensation to investment banking or other corporate finance activities on which the analyst collaborated (either individually or in the aggregate). The Standards also state that research analysts are prohibited from directly or indirectly promising a subject company or other issuer a favorable report or specific price target, or from threatening to change reports, recommendations, or price targets. 

chingmang1

thanks

xjiezhou

thanks!!!!!

xisuogu

thanks

pluto01

thanks

scarlett81

thx

cfaspace23

dude!!! thank you so much!!!

backpacker

same Q 4 & 6

沁馨原子

谢谢哦！