Reading 2-V: Standards of Professional Conduct & Guidan

white, black, company, class

Q5. In order for Clampett Securities to claim compliance with CFA Institute Soft Dollar Standards, the company must:

A) re-evaluate mixed-use research at least once a year.

B) comply with all recommended provisions of the Soft Dollar Standards.

C) send all purchased research to the client whose brokerage was used to pay for it.

Q6. When Jones produced the research report on Sunrise Technologies before it went public, she violated:

A) Standard V(A): Diligence and Reasonable Basis because her research was not thorough, and Standard I(B): Independence and Objectivity because of her obedience to her CEO.

B) Standard V(B): Communication with Clients and Prospective Clients by leaving relevant facts out of the report, but not Standard III(A): Loyalty, Prudence, and Care because the CEO cannot pass his fiduciary duty on to her.

C) Standard I(B): Independence and Objectivity because of her obedience to her CEO, and Standard II(A): Material Nonpublic Information because of Karloff’s involvement.

Q7. A client calls his money manager and asks the manager to liquidate a large portion of his assets under management for an emergency. The manager warns the client of the risk of selling many assets quickly but says that he will try to get the client the best possible price. This is a violation of:

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

B) Standard III(C), Suitability.

C) none of the Standards listed here.

Q8. In the process of recommending an investment, in order to comply with Standard V(A), Diligence and Reasonable Basis, a CFA Institute member must:

A) do both of these.

B) have a reasonable and adequate basis for the recommendation.

C) support a recommendation with appropriate research and investigation.

Q9. An analyst has found an investment with what appears to be a great return-to-risk ratio. The analyst double-checks the data for accuracy, keeps careful records, and is careful to not make any misrepresentations as he simultaneously sends an e-mail to all his clients with a “buy” recommendation. According to Standard V(A), Diligence and Reasonable Basis, the analyst has:

A) fulfilled all obligations.

B) violated the Standard if he does not verify whether the investment is appropriate for all the clients.

C) violated the Standard by communicating the recommendation via e-mail.