Reading - 2-I - LOS c: Q1-Q5

1、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.

D)   not a violation of Standard I(C) if the charterholder has a subscription to the publication.

The correct answer was  A)

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. Whether or not the charterholder has a subscription to the publication is not an issue.

2、The following information involves two research analysts at a brokerage firm.

§       Erik Bagenot, CFA, is preparing a research report on Global Enterprises, Inc. In preparing the report, he uses materials from many sources. For example, he uses factual information published by Standard & Poor's Corporation without acknowledging the source. He also uses excerpts from a research report prepared by another analyst. Bagenot makes only a slight change in wording for these excerpts, but acknowledges the source.

§       Sally Wain, who is currently enrolled in the CFA program, is preparing a research report on Manson Telecommunications. She attends a conference in which several investment experts provide their views about the future prospects of this company. Wain cites several quotations from these investment experts in her report without specific reference.

According to CFA Institute Standards of Professional Conduct involving prohibition against plagiarism, which of the following statements is TRUE?

A)   Wain violated the Standards, but Bagenot did not.

B)   Bagenot violated the Standards, but Wain did not.

C)   Both Bagenot and Wain violated the Standards.

D)   Neither Bagenot nor Wain violated the Standards.

The correct answer was  A)

Bagenot complied with Standard I(C), which permits publishing factual information from Standard & Poor's without acknowledgment and using excerpts with acknowledgment. Wain committed plagiarism because she failed to give specific references for the quotations that she used.

3、A money manger 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 should have gathered the relevant information before the prospect became a client.

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

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

The correct answer was  C)

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.

4、Wes Smith, CFA, has been working toward the completion of a Master of Science in Finance. He has passed all the necessary courses and written the necessary thesis. He still must defend the thesis in one month. Smith’s thesis advisor assures him that he will pass the thesis defense. Smith has new business cards printed with “M.S. in Finance” after his name. This is a violation of:

A)   Standard I(C), Misrepresentation.

B)   none of the Standards if Smith does not make the cards public until after he defends his thesis and receives his degree.

C)   Standard II(B), Market Manipulation.

D)   Standard VII(B), Reference to CFA Institute, the CFA Designation, and the CFA Program.

The correct answer was  B)

If the cards were distributed today he would be in violation of Standard I(C), Misrepresentation. However, if Smith does not make the cards public until after he receives the degree, there is no violation.

5、All of the following violate Standard I(C), Misrepresentation, EXCEPT:

A)   copying a proprietary computerized spreadsheet without seeking authorization from their creators.

B)   presenting factual information published by recognized statistical reporting services without acknowledgment.

C)   citing quotes attributable to "investment experts" without specific references.

D)   using excerpts from reports prepared by others with minor word changes without acknowledgment.

The correct answer was  B)  

Standard I(C), Misrepresentation, permits using recognized sources of factual information such as Standard & Poor’s Corporation and Moody’s Investors Service without acknowledgment.