Question 1 

According to the Code and Standards, members have a duty to disclose possible conflicts of interest to: 

A) both their employer and their clients.

B) only their employer.

C) only their clients.

D) neither employers nor clients, but the member must use "prudent judgment." 

Question 2 

John James has passed all three levels of the CFA exam, has received his charter, and is a dues-paying CFA Institute member in good standing. James may claim that he: 

 A) is among the elite of investment professionals because he became a CFA charterholder in only 3 years.

B) is licensed to practice investment analysis by the CFA Institute. 

C) is a CFA charterholder.

D) is a CFA charterholder, which means that he should be able to earn superior returns relative to non-charterholders.

Question 3 

Joshua Rosenberg, CFA, is an equity analyst who covers Northwest Implements, a farm implement manufacturer. Northwest's main factory is located in a sparsely inhabited region six hours by automobile from the nearest airport. Northwest has its own corporate jet and a landing strip is located near the facility. When Rosenberg contacts Northwest’s management to gather information for a report he is preparing on the company, Northwest’s chief financial officer, Thomas Blake, invites Rosenberg to visit Northwest’s headquarters and meet with management. Blake offers to send Northwest’s corporate jet to pick up Rosenberg from an airport near Rosenberg’s home and to return him home the same evening. Rosenberg estimates that it would require three days for him to make the visit using commercial travel. If Rosenberg accepts Blake’s offer and makes the trip to Northwest’s headquarters on the corporate jet, Rosenberg: 

A) has not violated the Code and Standards.

B) has violated the Code and Standards unless he discloses the trip and the payment of his travel expenses in his report on Northwest. 

C) has violated the Code and Standards unless he reimburses Northwest for the cost of the trip. 

D) has violated the Code and Standards if he proceeds to write the report.

Question 4 

 Vijay Gill, CFA, leases office space from Land Bank in exchange for an agreement that Gill will pay Land 20% of any fees paid by Land customers to Gill for investment management services. Gill also has an arrangement with Bloom Insurance Advisors whereby Gill receives a fee for each client referred. Gill only refers clients that request insurance products. Gill meets with Randolph Singh, a Land Bank customer, who is interested in Gill’s asset management services as well as insurance products. Gill is required to disclose to Singh: 

A) the terms of the arrangements with both Land Bank and Bloom.

B) neither the Land Bank nor Bloom arrangements, but may disclose them if he chooses to do so. 

C) the terms of the arrangement with Bloom, but not the terms of the arrangement with Land Bank. 

D) the terms of the arrangement with Land Bank, but not the arrangement with Bloom. 

Question 5 

The CFA Institute Standards of Professional Conduct are least likely to include: 

A) Duties to Clients

B) Integrity of Capital Markets

C) Investment Analysis, Recommendations, and Actions

D) Maintaining and Improving Professional Competence

Question 1 

The correct answer was A) both their employer and their clients. 

According to Standard VI(A), Disclosure of Conflicts, members have a duty to disclose to both their employer and their clients all matters which may impair their independence and objectivity or interfere with their duties to employer, clients, and prospects. 

This question tested from Session 1, Reading 2-VI, LOS A.

Question 2 

The correct answer was C)

James may claim that he is a CFA charterholder. The other claims listed would violate Standard VII, Responsibilities as a CFA Institute Member or CFA Candidate. He may state that he obtained his charter in three years if this is true, but cannot suggest that this implies superior ability. CFA Institute is not a licensing authority; rather it awards the CFA designation. A charterholder must not overpromise future investment performance tied to the CFA designation. 

This question tested from Session 1, Reading 2-VII, LOS B.

Question 3 

The correct answer was A) has not violated the Code and Standards. 

Standard I(B) requires members to maintain independence and objectivity. A visit by an analyst to an out-of-the-way site may be paid for by a client company host as long as the analyst can maintain objectivity. Members should encourage clients to limit the use of corporate aircraft, but exceptions can be made if transportation would not otherwise be available or would be inefficient. 

This question tested from Session 1, Reading 2-I, LOS B.

Question 4 

The correct answer was A)

Standard VI(C) Referral Fees requires members to disclose to clients and prospects any consideration or benefit received by the member or delivered to others for the recommendation of any services to the client or prospect. Gill is delivering a benefit to Land Bank and receiving a benefit from Bloom, both of which must be disclosed to Singh. 

This question tested from Session 1, Reading 2-VI, LOS C.

Question 5 

The correct answer was D) Maintaining and Improving Professional Competence 

The requirement that members must “maintain and improve their professional competence” is part of the Code of Ethics. The seven Standards of Professional Conduct are (I) Professionalism; (II) Integrity of Capital Markets; (III) Duties to Clients; (IV) Duties to Employers; (V) Investment Analysis, Recommendations, and Actions; (VI) Conflicts of Interest; and (VII) Responsibilities as a CFA Institute Member or CFA Candidate. Standard I(D) – Misconduct requires that members not engage in conduct that reflects adversely on their professional competence but does not specifically require that they maintain and improve their competence. 

This question tested from Session 1, Reading 1, LOS b, (Part 2)

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