Reading - 2-I - LOS b: Q6-Q7

6、According to CFA Institute Standards of Professional Conduct, which of the following is least likely a compliance procedure for maintaining independence and objectivity in making investment recommendations or taking investment action?

A)   Maintain files to support investment recommendations.

B)   Restrict special cost arrangements related to travel.

C)   Create a restricted list so that the firm disseminates only factual information about a controversial company.

D)   Limit gifts to token items only.

The correct answer was  A)

Maintaining files to support investment recommendations is not a compliance procedure for Standard I(B): Independence and Objectivity, but it is a compliance procedure for Standard V(C): Record Retention.

7、Tony Calaveccio, CFA, is the manager of the TrustCo Small Cap Venture Fund in Toronto. He places trades for the fund with River City Brokerage. River City presents Calaveccio with a bottle of inexpensive wine at Christmas each year. He does not disclose this fact in the prospectus of the small cap venture fund. This action is:

A)   in violation of the Standard concerning independence and objectivity.

B)   in violation of the Standard concerning disclosure of conflicts to clients and prospects.

C)   not in violation of the Code and Standards.

D)   in violation of the Standard concerning disclosure of additional compensation arrangements.

The correct answer was  C)  

Under Standard I(B) members are advised to "use reasonable care" in order to maintain independence and objectivity. While it is clearly understood that gifts from various entities have the potential to affect a member's independence and objectivity, " token gifts are acceptable, so long as the purpose is not to influence or reward.” There is no violation of the Code and Standards.