Walex

What is the rule of thumb for members, CFA charterholders and candidates in the CFA program when weighing the requirements of the CFA Institute Code and Standards and the requirements of local laws? If the applicable laws are:

A) less strict, they should make a judgment call on which to follow, the Code and Standards or the local laws and requirements.

B) more strict, they must still follow the Code and Standards.

C) more strict, they must adhere to the applicable laws.

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The rule of thumb for members, CFA charterholders and candidates in the CFA program requires that they adhere to the applicable laws if the applicable laws are more strict than the requirements of the Code and Standards. If there are no laws or the laws are less strict, they must adhere to the Code and Standards.

Walex

Benito Salvatore, CFA, is licensed in the established country of Oldworld but has clients and makes investments in the emerging country of Newworld. The regulations of Oldworld prohibit licensed investment professionals from taking gifts or gratuities in any amount from vendors or persons connected with potential investments. The laws of Newworld are silent on this issue. Unsolicited, Salvatore is offered a vase worth US $75 by a Newworld trust company and a bronze statue worth US $200 by a Newworld company that Salvatore is considering as a potential investment.Salvatore is:

A) permitted to accept both gifts.

B) not permitted to accept either gift.

C) permitted to accept the vase but not the statue.

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Under Standard I(A), Salvatore must, as a CFA charterholder, apply the CFA Institute Code and Standards or the controlling law, whichever is stricter. In this instance the stricter laws of Oldworld, where Salvatore is licensed, apply to prohibit the gifts, even though the gifts are offered in Newworld.

Walex

Don Roberts, a CFA Institute member, resides in Country L, where the securities laws and regulations are less strict than the CFA Institute Code and Standards. Roberts also does business in Country N, which has no securities laws or regulations. Thus, Country N has no laws prohibiting the use of material nonpublic information. Roberts has clients in both Country L and N. Country L's law states that the law of the locality where business is conducted governs. According to CFA Institute Standards of Professional Conduct about the use of material nonpublic information, Roberts may:

A) take investment action based on this information for clients in both Country N and Country L and for himself.

B) take investment action based on this information only for his clients in Country N but not for his clients in Country L or himself.

C) not take investment action on the basis of this information.

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Because applicable law states that the law of the locality where the business is conducted governs and local law is less strict than the Code and Standards, the member must adhere to the Code and Standards. Standard II(A) prohibits the use of material nonpublic information

Walex

An analyst who is a CFA Institute member receives an invitation from a business associate’s firm to spend the weekend in a high-quality resort. In order to abide by the Standards, the analyst should (may):

A) do both of the actions listed here.

B) refuse the invitation if the associate is from a firm he analyzes for his employer.

C) obtain written consent from his supervisor if the offer is contingent on achieving a target investment return.

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According to Standard I(B) Independence and Objectivity, the analyst should refuse the invitation if it is from a firm the analyst covers for his employer. The analyst can accept the invitation if it is from a client but the analyst must get written consent from his employer if the offer is contingent on future performance, to comply with Standard IV(B) Additional Compensation Arrangements

kasinkei

Tony Calaveccio, CFA, is the manager of the TrustCo Small Cap Venture Fund in Toronto. He places trades for the fund with River City Brokerage. River City presents Calaveccio with a bottle of inexpensive wine at Christmas each year. Calaveccio does not disclose this fact in the prospectus of the small cap venture fund. This action is:

A) in violation of the Standard concerning disclosure of additional compensation arrangements.

B) in violation of the Standard concerning disclosure of conflicts to clients and prospects.

C) not in violation of the Code and Standards.

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Under Standard I(B) Independence and Objectivity, members are advised to "use reasonable care" in order to maintain independence. While it is clearly understood that gifts from various entities have the potential to affect a member's independence and objectivity, a member can accept token gifts as long as they are not intended to influence or reward.

kasinkei

Tony Calaveccio, CFA, is the manager of the TrustCo Small Cap Venture Fund in Toronto. He places trades for the fund with Worldwide Brokerage. Worldwide is holding a conference in Amsterdam and has offered to pay for Calaveccio's airfare, meals, and accommodations associated with his attendance of the conference. The conference concerns European small cap securities and the EASDAQ. He decides that he will accept their offer and attend the conference. In order to comply with the Code and Standards, he:

A) may attend, but he must disclose the arrangement to TrustCo's clients and prospects as required under Standard IV.B.

B) may attend, but he must disclose the arrangement to his employer as a gift.

C) should not attend unless he pays for the trip himself.

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Under Standard I(B) gifts, benefits, compensation, or consideration cannot be accepted if the purpose was to influence or reward. Token items are OK. Worldwide Brokerage is not a client of Calaveccio but an entity that he does business with. As such Worldwide could influence Calaveccio to always do business with them which could be to the detriment of his fund if the execution of their trades starts to deteriorate compared to their competitors.

kasinkei

An analyst is told by his supervisor that when he feels he should write a buy recommendation he is free to do so, and when he feels he should write a sell recommendation he should check with the supervisor first. This practice is:

A) congruent with Standard V(A), Diligence and Reasonable Basis.

B) in violation of Standard I(B), Independence and Objectivity.

C) in violation of Standard V(A), Diligence and Reasonable Basis.

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The policy dictated by the supervisor would infringe upon the analyst’s independence and objectivity . It would probably discourage the analyst from making sell recommendations and, furthermore, present the opportunity for the supervisor to try and change the analyst’s mind.

kasinkei

According to CFA Institute Standards of Professional Conduct, which of the following is least likely a compliance procedure for maintaining independence and objectivity in making investment recommendations or taking investment action?

A) Create a restricted list so that the firm disseminates only factual information about a controversial company.

B) Restrict special cost arrangements related to travel.

C) Maintain files to support investment recommendations.

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Maintaining files to support investment recommendations is not a compliance procedure for Standard I(B): Independence and Objectivity, but it is a compliance procedure for Standard V(C): Record Retention.

kasinkei

According to CFA Institute Standards of Professional Conduct, which of the following is least likely a compliance procedure for maintaining independence and objectivity in making investment recommendations or taking investment action?

A) Create a restricted list so that the firm disseminates only factual information about a controversial company.

B) Restrict special cost arrangements related to travel.

C) Maintain files to support investment recommendations.

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Maintaining files to support investment recommendations is not a compliance procedure for Standard I(B): Independence and Objectivity, but it is a compliance procedure for Standard V(C): Record Retention.

kasinkei

All of the following would be permitted according to the CFA Institute Standards of Professional Conduct EXCEPT:

A) token gifts received from clients.

B) use of an issuer’s corporate aircraft when commercial transportation is not available.

C) air transportation paid by a corporate issuer for travel to a major metropolitan airport.

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In order to maintain independence and objectivity, members and candidates should restrict special reimbursement arrangements concerning commercial transportation and hotel charges. Use of corporate aircraft is permitted when commercial transportation is not available.