Problem with Ethics all, welcome, concepts, always

scr879

I am scoring in the range of 70-80% in Ethics, but I dont feel confident at all while marking answers and always get confused with 2 options out of 3…. Although my score doesnt look bad, I wanna grasp the concepts to the core
Any Advice, comments welcome!!

NakedPuts

I think its always like that with ethics. Having to choose the best answer from two reasonable sounding choices. Gotta just back your gut bro… There’s no real technique to raising ethics scores.

genuinecfa

I have no problem with ethics questions. I thought I would post how I approach them because maybe it would help somone make the difference between pass and fail.
Rule #1…THIS IS A TEST….Forget what you see your friend Charlie, who holds the charter, doing every day at work. Forget anything you would do in real life in relation to clients etc. You’re back in the academic world where everything has 1 answer.
Don’t just read the question for the facts. Read the question for what it seems obvious that the facts are leading to. Are they testing a concept of mat inside info? Order of trades? Reasonable basis?
If you are sure about what concept they are testing ask yourself what the facts add up to.
Is the info material? Is it inside? Does it meet all the tests. look for the point where it fails to meet one of the standards.
Now review the answers. If one of them reflects the conclusion you came to choose it.
Don’t be afraid to say that no standard has been violated if the facts lead you there.
When studying questions, ask yourself how the question could have been modified so that no standard was violated. Think about what would have made the situation better. Think about other standards that could have been violated. Pretty soon you will feel like you could write the questions.
Post a question and I will show you what I mean. It might be easier that way.

Analyze_This

Well, you could just go and study ethics from the curriculum. Having done that, think that you’ve covered everything in the ethics that cfai has provided you with.

lunarfollies

devildog, can u pls exaplin ur understanding w.r.t question below
An analyst finds a stock that has had a low beta given its historical return, but its total risk has been commensurate with its return. When writing a research report about the stock for clients with well-diversified portfolios, according to Standard V(B), Communication with Clients and Prospective Clients, the analyst needs to mention:
A) the relationship of the historical beta and return only.
B) both the historical beta and total risk and return.
C) the relationship of the historical total risk to return only.

DarienHacker

i think th answer to this 1 is ….B , as gotta communicate everythngg…is it right?

meghanjackson

btw the Answer is A

mkytz15

key phrase here is “well-diversified portfolio” “writing a research report about the STOCK” and “needs to mention”
total risk = systematic + unsystematic risk
low historical beta lowers the unsytematic (diversifiable) risk. the systematic risk (std devn of market portfolio) component need not come in report about the stock
so answer should be A.
more of a p/f mgmt qn than ethics i guess
is my concept correct?

economicz

Nara is right It seems a lot more like PM than ethics.
I think the key word is NEEDS. It’s another one of those absolutes that give clues to a question. The need comes from discussing the aberration from the norm, the low beta for the return. You NEED to discuss that.
You can suck a little more juice out of this question, too. What if it said he communicates it to his largest clients only? That’s a violation. If he communicate to to all clients first he can then call the largest clients first and that isn’t a problem.
What if he used this info to purchase stocks in ALL discretionary portfolios?…another violation.
What if he only communicated it to clients whose suitability profile fit the stock. That is not a violation to communicate based on suitability. You do not have to communicate everything to everyone.