Reading 2-I: Standards of Professional Conduct & Guida

mutual, public, offering, invested, initial

Q8. At the time of its initial public offering (IPO), a mutual fund is invested primarily in junk bonds. As part of its strategy, it is also invested in some zero-coupon U.S. Treasury bonds. The amount of the investment in the Treasury bonds is such that their maturity value equals 90% of the current value of the fund. Which of the following may a CFA Institute member say to her clients concerning the fund at issuance?

A) Since the fund is backed by the U.S. government, you know you will get your money back.

B) The fund is virtually default risk free.

C) A CFA Institute member may not make either of these statements.

Q9. A money manager works for a full-service brokerage firm. After meeting with a new client and gathering all relevant information, the money manager says that she thinks her firm can perform all the financial services the new client needs. With respect to Standard I(C), Misrepresentation, this:

A) may not be a violation if the manager's opinion is based upon the factual information gathered.

B) may not be a violation if the representation was made orally.

C) is a violation because she cannot make statements like this under any circumstances.

Q10. The following information involves two research analysts at a brokerage firm.

§ Erik Bagenot, CFA, is preparing a research report on Global Enterprises, Inc. In preparing the report, he uses materials from many sources. For example, he uses factual information published by Standard & Poor's Corporation without acknowledging the source. He also uses excerpts from a research report prepared by another analyst. Bagenot makes only a slight change in wording for these excerpts, but acknowledges the source.

§ Sally Wain, who is currently enrolled in the CFA program, is preparing a research report on Manson Telecommunications. She attends a conference in which several investment experts provide their views about the future prospects of this company. Wain cites several quotations from these investment experts in her report without specific reference.

Q11. According to CFA Institute Standards of Professional Conduct involving prohibition against plagiarism, which of the following statements is TRUE?

A) Both Bagenot and Wain violated the Standards.

B) Wain violated the Standards, but Bagenot did not.

C) Bagenot violated the Standards, but Wain did not.