Reading 5: Pearl Investment Management (A), (B), and (C)－

formal, system, following, effective, Investment

Q25. All of the following would be effective components of a formal compliance system EXCEPT:

A) allocation of trades should first be to certain large client accounts with similar investment objectives and constraints and then to other suitable client accounts.

B) seminars and conferences may be paid for using soft dollars only if the activity qualifies as research.

C) the firm should disclose any soft-dollar arrangements to clients.

Q26. Kimberly Olson has recently become a CFA charterholder, and has just started a new job at Securities Online as a junior analyst. After preparing her first research report, Olson decides to consult with one of the senior analysts who make minor corrections to improve the content of the report. Olson makes changes to the report according to the senior analyst. Upon presentation of the report, Olson finds that statements made by the senior analyst contained incorrect information. Which of the following statements is TRUE?

A) Olson did not need to check the additional comments.

B) If Olson attributes those comments to the senior analyst, she cannot be held responsible for incorrect information.

C) Olson should have checked the accuracy of the comments.

Q27. Marc Feldman, CFA, is manager of corporate investor relations for a high-tech startup, zippy.com, in Boise, Idaho. Feldman learns that Larry Smith, controller, is altering the accounting records. Knowing the data is incorrect, Feldman releases Smith's financial data to investors. This action:

A) constitutes a violation of the Standard concerning duty to employer.

B) constitutes a violation of his fundamental responsibilities under the Code and Standards.

C) constitutes a violation of Standard III(D) concerning performance presentation.