mouse123

A CFA charterholder in a managerial position is in the process of hiring new analysts. If the charterholder conducts background checks on the job applicants with respect to their character, the charterholder has:

A) violated the Code of Ethics by invading the applicants' privacy.

B) complied with Standard I(D) concerning professional misconduct.

C) complied with Standard VII(A) concerning conduct of members and candidates in the CFA Program.

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To avoid potential problems and comply with Standard I(D), employers are encouraged to conduct background checks on potential employees.

karoliukas

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 representation was made orally.

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

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

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There is no violation if the opinion is based upon the factual information gathered and the firm’s actual capabilities. This is true whether or not the representation was written, oral, or electronic. None of the other choices are correct.

karoliukas

Based on CFA Institute Standards of Professional Conduct, which of the following statements is a violation of Standard I(C), Misrepresentation?

A) An investment manager recommends to a prospective client an investment in GNMA bonds because they are guaranteed by the federal government.

B) A young trainee bond trader tells a prospective client that she can assist the client in all the client's investment needs: equity, fixed income, and derivatives and based on her years of experience as an analyst in the business that an investment looks like it has lots of potential.

C) A broker says XYZ stock is very likely to double in value over the next six months.

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CFA Institute members, CFA charterholders, and CFA candidates are prohibited from misrepresenting their services or qualifications and inappropriate assurances about any investment or its return.

karoliukas

Which of the following is most likely permitted under Standard I(C), Misrepresentation?

A) Using excerpts from reports prepared by others without acknowledgement.

B) Including an exhibit of the current yield curve in a report to a client without stating its source.

C) Citing quotes attributed to "investment experts" without specific reference.

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The current yield curve is factual information that is available from many recognized financial or statistical reporting services.

karoliukas

A CFA charterholder gathers the closing prices of a security from a widely read publication. The charterholder uses the data as part of a report she is preparing and fails to report the data source in the report. This is:

A) not a violation of Standard I(C) if the data can be gathered from several public sources.

B) a violation of Standard I(C).

C) not a violation of Standard I(C) if the data cannot be gathered from several public sources.

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Since the security prices represent factual information that can be verified from several sources, there is no violation. It could have been a violation had the information been exclusively published by the source.

karoliukas

Ellen Miamoto, CFA, is preparing a research report on an employment agency, Temp Help, Inc. She includes in her report:

• A copy of a paragraph from a report by the Wall Street research firm of Benson Smith.
• A graph Miamoto has modified based on an original graph prepared by Gordon Thompson that was published in the Wall Street Journal.
• A chart of national employment trends that Miamoto created using data from the U.S. government's Bureau of Labor Statistics.

In her report, Miamoto must identify and acknowledge:

A) Benson Smith, Gordon Thompson, and the Bureau of Labor Statistics.

B) Benson Smith and Gordon Thompson.

C) Benson Smith only.

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Standard I(C) Misrepresentation requires members to acknowledge and identify the author, publisher, or source of material they use in substantially the same form as the original. The use of Benson Smith’s original material and Gordon Thompson’s modified material must be acknowledged. The exception to this requirement is information from recognized financial and statistical reporting services, such as the government agencies that compile national economic statistics.

karoliukas

Marc Randall, CFA, is an investment analyst. During a meeting with a potential client, Randall's boss states that, "You can be sure our investments will always outperform Treasury Bonds because of our fine research staff members, like Marc." Randall knows that this statement is:

A) a violation of the Standard concerning prohibition against misrepresentation.

B) a violation of fiduciary duties owed to clients under the Standards.

C) not in violation of the Code and Standards.

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Under Standard I(C), members are forbidden from guaranteeing a specific rate of return on volatile investments. Therefore, the statement is in violation of the Standard.

karoliukas

Francisco Perez, CFA, CPA, is a portfolio manager for an investment advisory firm. Due to the prominence of his position, he is often invited to attend free marketing and educational events hosted by firms which seek to inform the investment community about their investment processes. One such firm, Unlimited Horizons, has invited Perez to attend free educational events which qualify for Continuing Education credits which could help Perez maintain his CPA designation. Perez should most likely:

A) accept the invitation as no cash compensation is involved and the primary intent is to educate and inform the investment community.

B) decline to attend the event as it could result in a violation of Standard I(B) "Independence and Objectivity."

C) decline to attend the event as it could result in a violation of Standard I(A) "Knowledge of the Law."

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Perez should decline the invitation as it creates the impression of lack of independence. If he does not accept the free continuing education courses, he would have to pay for them some other way so the free courses are a form of compensation. Nothing in the vignette suggests the free classes are illegal.

karoliukas

Susan Nielsen, CFA, is an equity research analyst on a fact-finding property tour with 6 other analysts to learn about Just Kittens, Inc. Just Kittens sells tungsten ball-bearings and has 16 warehouses, and 20 manufacturing, research, and wholesale sales outlets scattered over 8 countries – mostly emerging markets. Because of the remote location of some of the facilities, commercial travel is effectively unavailable. Just Kittens charters a jet and various busses to take the research analysts to the properties. If Nielsen accepts these accommodations, she is most likely:

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

B) not in violation of Standard I(B) "Independence and Objectivity" because best practices dictate that better access to company executives is likely to lead to more accurate and timely information.

C) not in violation of Standard I(B) "Independence and Objectivity" because commercial travel is effectively unavailable.

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Nielsen is not in violation of Standard I(B) "Independence and Objectivity" because commercial travel is effectively unavailable.

karoliukas

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

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

C) do both of the actions listed here.

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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.