Reading 2-VII: Standards of Professional Conduct & Guida class, label, style, center, 2010

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Session 1: Ethical and Professional Standards
Reading 2-VII: Standards of Professional Conduct & Guidance: Responsibilities as a CFA Institute Member or CFA Candidate

LOS B.: Reference to CFA Institute, the CFA Designation, and the CFA Program.

 

 

 

When Wes Smith first joined Advisors, Inc., he was excited that all the analysts at the firm had the CFA designation. In letters to prospective clients, he states that this ensures that Advisors can provide better service than their competitors. With respect to Standard VII(B), Reference to CFA Institute, the CFA Designation, and the CFA Program, this is:

A) a violation because he mentions the CFA designation in the letter.

B) a violation for both mentioning the CFA designation and saying the firm can guarantee better service.

C) a violation because he cannot guarantee better service.

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According to Standard VII(B), the analyst cannot guarantee better service. Smith can mention the fact that all analysts have the designation, but he is limited in what he can say with respect to this fact. He could say, for example, that this means the analysts all had to take and pass three rigorous exams.

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Nichole Zeller and Randy Toffler have both passed Level II of the CFA Exam Program and have registered for Level III. Zeller circulates a resume stating that she is a candidate for the CFA designation and has passed Level II of the CFA program. Toffler circulates a resume stating that he is a CFA II. Which of the following statements is TRUE?

A) Only Zeller has violated the Code of Standards.

B) Only Toffler has violated the Code of Standards.

C) Both Zeller and Toffler have violated the Code of Standards.

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The Code and Standards permit an individual to state that he or she is a candidate for the CFA designation as long as the person is registered for the next CFA exam. The same individual may state the fact that he or she has passed Level I or II of the CFA program. There is no partial designation, such as CFA II.

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Judy Albert and Bob Tye, who recently started their own investment advisory business, plan to take the Level III CFA examination next year. Albert's business card reads, "Judy Albert, CFA Candidate." Tye has not put anything about the CFA on his business card. However, the firm's promotional materials describe the CFA requirements and indicate that Tye participates in the CFA program and has completed Levels I and II. According to CFA Institute Standards of Professional Conduct:

A) Both Albert and Tye have violated the Standards.

B) Albert has violated the Standards but Tye has not.

C) Neither Albert nor Tye has violated the Standards.

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On letterheads and business cards and in directory listings, only the mark CFA or the words Chartered Financial Analyst should appear after the charterholder's name.

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An analyst has not paid her CFA Institute dues for several years but has filed a professional conduct statement annually. Which of the following statements is TRUE regarding her status with CFA Institute? The analyst’s membership is:

A) considered "inactive."

B) temporarily suspended until she pays her dues.

C) suspended and she is not considered a CFA charterholder.

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Standard VII(B), Reference to CFA Institute, the CFA Designation, and the CFA Program, applies. In order to use the CFA designation, the member must pay annual dues and submit a yearly Professional Conduct Statement.

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Robert Hopkins has earned the right to use the CFA designation and wants to indicate this on his business card. According to CFA Institute Standards of Professional Conduct, which of the following is the proper use of the professional designation on his business card?

A) Robert Hopkins, CFA Charterholder

B) Robert Hopkins, cfa

C) Robert Hopkins, C.F.A.

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The CFA designation should always be capitalized and shown without periods. The CFA designation should not be referred to as a degree. Placing the designation "CFA" or "CFA Charterholder" after one's name on a resume, business card, brochure, or other published material is appropriate.

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Ralph Lim and Susan Bland have both passed Level I of the CFA Program. Both are currently enrolled to sit for Level II. Lim's business card reads, "Ralph Lim, CFA Level I." Bland's resume states, "Level II Candidate in the CFA Program." According to CFA Institute Standards of Professional Conduct involving use of the professional designation:

A) Lim violated the Standard, but Bland did not.

B) Both Lim and Bland violated the Standard.

C) Bland violated the Standard, but Lim did not.

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There is no designation for someone who has passed Level I, Level II, or Level III of the CFA examination. Candidates may state, however, that they have completed Level I, II, or III, as the case may be, in the CFA Program. Thus, Lim violated the Standard, but Bland did not.

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During 2004 Nancy Arnold received an undergraduate business degree with a management major and completed all requirements for the CFA designation imposed by CFA Institute. She is applying for employment at several brokerage firms. Her resume states, “I was awarded the CFA degree in 2004 by CFA Institute.” Her resume also states that she graduated “with honors” and majored in finance. Her grade point average was 3.48 but “with honors” requires a 3.50 grade point average.

Which of the following statements about Standard VII(B), Reference to CFA Institute, the CFA Designation, and the CFA Program, and Standard I(C), Misrepresentation, is TRUE? Arnold:

A) violated Standard I(C) but she did not violate Standard VII(B).

B) violated both Standard VII(B) and Standard I(C).

C) did not violate either Standard VII(B) or Standard I(C).

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Arnold violated Standard VII(B). The CFA designation should not be referred to as a degree. Arnold also violated Standard I(C) because her claim that she graduated “with honors” is not true.

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Jake Miles, CFA, includes the following phrase on his business card: “Jake Miles is your trusted local CFA.” Is this a violation of Standard VII(B)?

A) Yes, because he cannot put the initials "CFA" on his business card.

B) No, because his CFA Institute membership indicates that he is indeed trustworthy.

C) Yes, because he uses CFA as a noun.

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The initials CFA cannot be used as a noun. The initials can appear on a business card but cannot be used to exaggerate the meaning or implications of membership.

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All of the following statements in promotion of your services are in violation of CFA Institute Standards of Practice handbook EXCEPT:

A) I guarantee under my management that you will receive returns in excess of the market index average.

B) based upon my research, you will achieve a 20% compound annual rate of return on small cap stocks over the next 5 years.

C) I passed Level II of the CFA Program in 2003.

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Candidates may refer to the CFA level(s) passed and the associated dates as long as a partial designation is not implied. They may not guarantee or promise a given level of return.