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标题: Ethical and Professional Standards 【Reading 2】Sample [打印本页]
作者: prashantsahni    时间: 2012-3-19 14:05     标题: [2012 L1] Ethical and Professional Standards 【Session 1 - Reading 2】Sample

Nicholas Brynne, CFA, is a fixed-income analyst who trades in mortgage-backed securities (MBS). The MBS industry has seen sweeping regulatory changes since Brynne took his current position, and he now feels his understanding of applicable laws and regulatory standards is dated. Brynne must:
A)
update his understanding of applicable laws and regulatory standards relating to his position.
B)
have all trades reviewed by his compliance department until he has obtained an expert level of knowledge in compliance.
C)
rely on his firm’s policies and procedures for guidance on legal and regulatory standards.


See Standard I(A) "Knowledge of the Law." Brynne should update his understanding of applicable laws and regulatory standards relating to his position, although he is not required to be an expert in compliance. Relying only on firm policies and procedures is not sufficient.
作者: prashantsahni    时间: 2012-3-19 14:05

The CFA Institute Standards of Practice Handbook requires CFA Institute members to do all the following EXCEPT:
A)
receive written permission from both their employer and outside clients to engage in investment consulting outside the firm.
B)
to inform employer, clients, and potential clients of benefits received for recommending products or services.
C)
to disclose in writing to the proper regulatory authority all observed violations of the securities laws and regulations.


Members are not required to report violations of others to regulatory authorities, either verbally or in writing, but such reporting may be prudent.
作者: prashantsahni    时间: 2012-3-19 14:06

WEB, an investment-banking firm, is the principal underwriter for MTEX's upcoming debenture issue. Wendy Berry, CFA, an analyst with WEB, has found out from an employee in MTEX's programming department that a serious glitch was recently discovered in the software program of their major new product line. In fact, the glitch is so bad that most of their orders have been canceled. Berry checked the debenture's prospectus and found no mention of this development. The red herring prospectus has already been distributed. Berry's best course of action is to:
A)
notify potential investors of the omission on a fair and equitable basis.
B)
inform her immediate supervisor at WEB of her discovery.
C)
keep quiet since this is material non-public inside information.


Berry should report this information only to her immediate supervisor. Subsequently, she and her supervisor may consult with legal counsel concerning the competing issues in this situation. For the present, she should avoid disclosure to colleagues who do not need to know the information and she should also avoid disclosure to clients.
作者: prashantsahni    时间: 2012-3-19 14:06

Josh LeBlanc, a CFA charterholder, is an investment analyst for a small stock brokerage firm. He wants to acquire and maintain knowledge about applicable laws, rules, and regulations relating to his professional activities. According to the CFA Institute Standards of Professional Conduct, which of the following ways is least likely to meet compliance procedures?
A)
Review written compliance procedures on a regular basis.
B)
Rely on past practices followed within his firm.
C)
Keep informed about changes in applicable laws, rules, and regulations.


LeBlanc should follow the compliance procedures under Standard IA -- Knowledge of the law. Relying on his firm’s past practices may be insufficient for LeBlanc to stay current with changes in applicable laws, rules, and regulations.
作者: prashantsahni    时间: 2012-3-19 14:07

Don Roberts, a CFA Institute member, resides in Country L, where the securities laws and regulations are less strict than the CFA Institute Code and Standards. Roberts also does business in Country N, which has no securities laws or regulations. Thus, Country N has no laws prohibiting the use of material nonpublic information. Roberts has clients in both Country L and N. Country L's law states that the law of the locality where business is conducted governs. According to CFA Institute Standards of Professional Conduct about the use of material nonpublic information, Roberts may:
A)
take investment action based on this information for clients in both Country N and Country L and for himself.
B)
not take investment action on the basis of this information.
C)
take investment action based on this information only for his clients in Country N but not for his clients in Country L or himself.


Because applicable law states that the law of the locality where the business is conducted governs and local law is less strict than the Code and Standards, the member must adhere to the Code and Standards. Standard II(A) prohibits the use of material nonpublic information.
作者: prashantsahni    时间: 2012-3-19 14:07

According to the CFA Institute Standards of Professional Conduct, Standard I(A), Knowledge of the Law, members shall not knowingly participate or assist in any violations of laws, rules, or regulations. An analyst:
A)
is held responsible for participating in illegal acts when the law is evident to anyone knowing the law and is held responsible for violations by others when the analyst is unaware of the facts giving rise to the violation.
B)
must report all legal violations to the proper regulatory commission and is held responsible for participating in illegal acts when the law is evident to anyone knowing the law.
C)
is held responsible for participating in illegal acts when the law is evident to anyone knowing the law and can participate in a violation by having knowledge of the violation and taking no action to stop it or disassociate from it.


If you suspect someone is planning or engaging in illegal activities, you should:
作者: prashantsahni    时间: 2012-3-19 14:08

Deloris Johnson, CFA, suspected that her intern, who was working without pay at her brokerage firm, had violated a federal securities regulation. Johnson discussed the matter with her company's legal counsel who said that the intern's conduct was illegal. According to the CFA Institute Code and Standards of Professional Conduct, Johnson can dissociate herself from this illegal activity by:
A)
reporting the activity to the appropriate authorities.
B)
transferring supervision of the intern to another person.
C)
telling her intern to stop such conduct.

Johnson can dissociate herself from the illegal activity by reporting the activity to the appropriate authorities. However, the Code and Standards do not require that she report legal violations to the appropriate governmental or regulatory organizations, but such disclose is prudent in this circumstance.
By transferring the intern to another supervisor this may not solve the problem of the illegal activity occurring and the company would still be held liable for it.
作者: prashantsahni    时间: 2012-3-19 14:09

Jane Dawson, CFA, an analyst at a New York brokerage firm, suspects that Bob Boatman, CFA, another analyst at the same firm, has violated a state securities law. According to the CFA Institute Standards of Professional Conduct, Dawson is:
A)
required to report the suspected violation to CFA Institute.
B)
NOT required to report the violation to the appropriate governmental or regulatory organizations.
C)
required to report the suspected violation to the appropriate state regulatory agency.


The Code and Standards do not require that members report legal violations to the appropriate governmental or regulatory organizations, but such disclosure may be prudent in certain circumstances. Dawson should consult legal counsel and disassociate from the activity.
作者: prashantsahni    时间: 2012-3-19 14:09

If an analyst suspects a client or a colleague of planning or engaging in ongoing illegal activities, which of the statements about the actions that the analyst should take is most correct? According to the CFA Institute Standards of Professional Conduct, the analyst should:
A)
disassociate from any illegal or unethical activity if the member has reasonable grounds to believe that the activity is illegal or unethical.
B)
consult counsel to determine the legality of the activity.
C)
consult counsel to determine the legality of the activity and disassociate from any illegal or unethical activity if the member has reasonable grounds to believe that the activity is illegal or unethical.


According to the procedures for compliance involving Standard I(A), CFA Institute members should determine legality and disassociate from any illegal or unethical activity.
作者: prashantsahni    时间: 2012-3-19 14:10

Bob Smith, CFA, is an outside board member of Atlantic Technologies, but is not paid by the firm for his services. An employee at Atlantic informs Smith that Atlantic has improperly timed the booking of contracts to achieve the desired quarterly financial results. The misleading financial statements would turn losses into profits. Smith confers with the firm's legal counsel who indicates that this conduct is, in fact, illegal. Smith urges Sharon White, Atlantic's chief operating executive, to change the financial statements, but she refuses to do so. According to CFA Institute Standards of Professional Conduct, which of the following statements best describes what Smith should do in this situation?
A)
Smith should immediately make CFA Institute aware of the situation at Atlantic.
B)
Smith should wait until the next board meeting, which is scheduled in two weeks, to make other board members aware of the situation.
C)
Smith should promptly disassociate himself from Atlantic's actions by resigning as a director or by reporting the activities to the appropriate authorities.


Smith should disassociate from any illegal activity by resigning as a director or by reporting the activities to appropriate authorities. Inaction combined with continuing association with Atlantic's illegal conduct may be construed as participation, or assistance, in the illegal conduct.
作者: prashantsahni    时间: 2012-3-19 14:10

Which of the following is a CORRECT statement of a member's duty under the Code and Standards?
A)
In the absence of specific applicable law or other regulatory requirements, the Code and Standards govern the member's actions.
B)
A member is required to comply only with applicable local laws, rules, regulations, or customs even though the CFA Institute Code and Standards may impose a higher degree of responsibility or a higher duty on the member.
C)
A member who trades securities in a foreign securities market where no applicable local laws or stock exchange rules regulate the use of material nonpublic information may take investment action based on this information.


The Code and Standards represent a minimum level of guidance for members’ actions, not a maximum level. The key to remember here is that whether the local area does or does not have standards governing member’s actions, one must follow the stricter standard environment.
作者: prashantsahni    时间: 2012-3-19 14:11

Ernesto Vivaldo is a CFA candidate. He is working in the branch office of an American-based investment company in Belgium. Vivaldo is a citizen of Venezuela. In his country, a portfolio manager is not required to disclose referral fees. Belgian law does not allow referral fees for portfolio managers. Vivaldo has been offered a deal that involves a referral fee. Vivaldo should follow the requirements of:
A)
Venezuela.
B)
Belgium.
C)
CFA Institute.


According to Standard I(A) Knowledge of the Law, CFA candidates and current CFA Institute members must follow whichever law is stricter. In this case, the strictest laws are those of Belgium.
作者: prashantsahni    时间: 2012-3-19 14:11

Jason Blackwell, CFA, works as an investment manager for Mega Capital, a large multinational brokerage firm. He resides in a country whose applicable law is stricter than the Code and Standards but does business with clients in a country whose applicable law is less strict than the Code and Standards. Blackwell decides to follow the Code and Standards for clients in the less strict country. While Blackwell is still employed at Mega, Lego Associates verbally asks Blackwell to review client portfolios during evenings and weekends for a fee. Blackwell gets written consent from his immediate supervisor at Mega to undertake this independent activity for a one-month trial basis.Which of the following statements about Blackwell’s actions involving Standard I, Professionalism, and Standard IV(A), Loyalty is most accurate? Blackwell:
A)
violated both Standard I and Standard IV(A).
B)
violated Standard I but did not violate Standard IV(A).
C)
did not violate either Standard I or Standard IV(A).


Blackwell violated Standard I, Professionalism. Because the applicable laws in his resident county were stricter than the Code and Standards, he must adhere to the more strict applicable law.
作者: prashantsahni    时间: 2012-3-19 14:12

A member or candidate who suspects that a colleague is violating the law should most appropriately:
A)
consult with the company counsel to determine if in fact a law is being violated.
B)
report the illegal activity to CFA Institute Professional Standards Review Board for action.
C)
report all illegal activities to the appropriate regulatory agency.


According to Standard I(A), Knowledge of the Law, members and candidates shall not knowingly participate or assist in any violation of laws, rules, regulations, or the Code and Standards.
When members suspect a client or a colleague of planning or engaging in ongoing illegal activities, members should take the following actions:
Note: The Code and Standards do not require that members report legal violations to the appropriate governmental or regulatory organizations, but such disclosure may be prudent in certain circumstances.
作者: prashantsahni    时间: 2012-3-19 14:12

An analyst, who is a CFA charterholder, is working in a foreign country. Which of the following statements is CORRECT? The analyst is:
A)
governed by the laws and standards of the country in which he is living and working.
B)
governed by CFA Institute's Code and Standards.
C)
covered by the strictest of the following laws and rules: his own country's, the foreign country's or CFA Institute's Code and Standards.


The analyst is covered by the strictest of the following laws and rules: his own country’s, the foreign country’s or CFA Institute’s Code and Standards.
作者: prashantsahni    时间: 2012-3-19 14:13

Joan Platt, CFA, operates an investment advisory service in New York but maintains an office in Xania. Xania recently established a stock market, which is not very efficient. None of the Xanian stocks trade in the U.S. market. Xania legally permits the use of material inside information. Platt believes that using inside information would help her compete against other Xanian investment advisors and also help some of her Xanian clients reach their investment objectives. Platt is considering adopting local investment practices in Xania. According to CFA Institute Standards of Professional Conduct, Platt may:
A)
use material inside information because Xania legally permits this practice.
B)
use material inside information, but only after notifying CFA Institute.
C)
not use material inside information.


Because applicable law involving material inside information is less strict than the Code and Standards, Platt must adhere to the Code and Standards. Standard II(A) prohibits against use of material nonpublic information.
作者: prashantsahni    时间: 2012-3-19 14:13

Benito Salvatore, CFA, is licensed in the established country of Oldworld but has clients and makes investments in the emerging country of Newworld. The regulations of Oldworld prohibit licensed investment professionals from taking gifts or gratuities in any amount from vendors or persons connected with potential investments. The laws of Newworld are silent on this issue. Unsolicited, Salvatore is offered a vase worth US $75 by a Newworld trust company and a bronze statue worth US $200 by a Newworld company that Salvatore is considering as a potential investment.Salvatore is:
A)
permitted to accept both gifts.
B)
permitted to accept the vase but not the statue.
C)
not permitted to accept either gift.


Under Standard I(A), Salvatore must, as a CFA charterholder, apply the CFA Institute Code and Standards or the controlling law, whichever is stricter. In this instance the stricter laws of Oldworld, where Salvatore is licensed, apply to prohibit the gifts, even though the gifts are offered in Newworld.
作者: kim226    时间: 2012-3-19 14:16

Mary Kim, CFA, practices in the established country of Oldasia as well as in the emerging country of Newasia. By regulation, Oldasia prohibits licensed investment advisors from trading in securities ahead of their clients. Newasia has no laws or regulations in this area. Mary Kim may:
A)
trade ahead of her clients in Newasia only.
B)
not trade ahead of her clients in either country.
C)
trade ahead of her clients in Newasia only, as long as she has made full disclosure to her clients that she reserves the right to do this.


Under Standard I(A), Mary Kim, as a CFA charterholder, must apply the CFA Institute Code and Standards or the controlling law, whichever is stricter. Because Standard VI(B) requires members to put client trades ahead of their own transactions, Mary Kim must follow the standard in the absence of governing law, or where the law is less strict than the standard.
作者: kim226    时间: 2012-3-19 14:16

Janet Green, CFA, provides investment advice and other services to clients in several countries. She resides in Country A whose securities laws and regulations are less strict than the Code and Standards. She also conducts business with clients in Country B, which has no securities laws or regulations, and in Country C, which has securities laws and regulations that are stricter than the Code and Standards. Which of the following statements is CORRECT? According to CFA Institute Standards of Professional Conduct, Green must adhere to the Code and Standards in:
A)
Country A, Country B, and Country C.
B)
Country A and Country B but the law in Country C.
C)
Country A but the law in Country B and Country C.


Green needs to follow Standard I(A) -- Knowledge of the law. In Country A, Green must adhere to the Code and Standards because Country A’s laws are less strict. In Country B, Green must also adheres to the Code and Standards because Country B has no securities laws. Because Country C’s applicable law is stricter than the requirements of the Code and Standards, Green must adhere to the laws of Country C.
作者: kim226    时间: 2012-3-19 14:17

Which of the following statements about the responsibilities of CFA charterholders is CORRECT? CFA charterholders:
A)
must comply with the laws and rules governing their profession and must not engage in any individual behavior that reflects adversely on the entire profession.
B)
are only obligated to comply with securities laws in the U.S.
C)
need not comply with the laws and rules governing their profession or must not engage in any individual behavior that reflects adversely on the entire profession.


CFA charterholders must comply with the laws and rules governing their profession and must not engage in any individual behavior that reflects adversely on the entire profession. While they should act honorably and follow U.S. securities laws, they are obligated to more than that, as set forth in the Code and Standards.
作者: kim226    时间: 2012-3-19 14:17

Which of the following is a CORRECT statement of a member's duty under the Code and Standards?
A)
In the absence of specific applicable law or other regulatory requirements, the Code and Standards govern the member's actions.
B)
A member who trades securities in a country with less strict laws, rules, regulations, or customs may follow those laws if he discloses this information to his client.
C)
A member is required to comply only with applicable local laws, rules, regulations, or customs even though the CFA Institute code and Standards may impose a higher degree of responsibility or a higher duty on the member.


Members are always, at a minimum, subject to the Code and Standards.
作者: kim226    时间: 2012-3-19 14:18

A CFA Institute member conscientiously maintains records of changes in security regulations. The member notices that his colleagues do not, and does NOT say anything. Is this a violation of Standard I(A)?
A)
Yes, because the member is bound by the Code of Ethics.
B)
Yes, and the member should disassociate from these colleagues.
C)
No, as long as the colleagues do not violate the new rules.


The last bullet point of the Code says that a member shall “Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.” Ignoring the neglect of rule changes of others would clearly be incongruent with this component. As long as the colleagues do not violate the laws, the member does not have to disassociate himself from the colleagues.
作者: kim226    时间: 2012-3-19 14:18

Maria Valdes, CFA, is an analyst for Venture Investments in the country of Newamerica, which has laws prohibiting the acceptance of any gift from a vendor if the gift exceeds US $250. Valdes has evidence that her Venture Investments colleague, Ernesto Martinez, CFA, has been receiving gifts from vendors in excess of US $250.Valdes is obligated to:
A)
disassociate herself from the activity, and urge Venture to persuade Martinez to cease the activity.
B)
disassociate herself from the activity, urge Venture to persuade Martinez to cease the activity, and inform CFA Institute of the violation.
C)
disassociate herself from the activity, urge Venture to persuade Martinez to cease the activity, and inform CFA Institute and regulatory authorities of the violation.


Standard I(A), Knowledge of the Law requires members who have knowledge of colleagues engaging in illegal activities to disassociate from the activity and urge their firms to persuade the individual to cease such activity. Reporting to regulatory authorities may be prudent in certain circumstances, but is not required. Reporting to CFA Institute is not required.
作者: kim226    时间: 2012-3-19 14:19

A CFA Institute member works for Secure Securities, Inc., and plays rugby on the firm’s rugby team. Secure Securities’ team recently played the team of a rival firm. During the game, a fight broke out and the CFA Institute member was the instigator, but no one was seriously hurt. Is this a violation of I(A) concerning maintaining knowledge and complying with laws, rules, and regulations?
A)
Yes, because the member is bound by the Code of Ethics.
B)
No, because a fight at a rugby game is not a professional activity.
C)
Yes, because the member could have hurt someone in the fight.


Standard I(A) covers members' professional activity only. Violations outside professional activity that involve fraud, theft or deceit would potentially be violations.
作者: kim226    时间: 2012-3-19 14:19

What is the rule of thumb for members, CFA charterholders and candidates in the CFA program when weighing the requirements of the CFA Institute Code and Standards and the requirements of local laws? If the applicable laws are:
A)
less strict, they should make a judgment call on which to follow, the Code and Standards or the local laws and requirements.
B)
more strict, they must still follow the Code and Standards.
C)
more strict, they must adhere to the applicable laws.


The rule of thumb for members, CFA charterholders and candidates in the CFA program requires that they adhere to the applicable laws if the applicable laws are more strict than the requirements of the Code and Standards. If there are no laws or the laws are less strict, they must adhere to the Code and Standards.
作者: kim226    时间: 2012-3-19 14:19

CFA Institute members should encourage their employers to do all of the following EXCEPT:
A)
require employees to write personal ethics statements.
B)
make clear that dishonest personal behavior reflects poorly on the profession.
C)
conduct background checks on potential employees to ensure that they are of good character and eligible to work in the investment industry.


There is no reason to have employees write personal ethics statements. CFA Institute encourages all of the other actions.
作者: kim226    时间: 2012-3-19 14:21

CFA Institute believes:
A)
that a minimum level of professional responsibility and conduct dictates that members be aware of and comply with laws, rules, and regulations governing their conduct.
B)
that a maximum level of professional responsibility and conduct dictates that members be aware of and comply with laws, rules, and regulations governing their conduct.
C)
that firms should comply with all domestic laws and regulations and that these laws also govern behavior in foreign markets, regardless of foreign laws and requirements.


CFA Institute’s Code and Standards dictate a minimum level of conduct. Standards should not be based on ethics of upper management and the board of directors of a company. Firms must comply with the strictest applicable standards, whether they be foreign or domestic laws and regulations.
作者: kim226    时间: 2012-3-19 14:21

Kenny Barrett, CFA, is working in the Australian office of American Investments Co. From an informal conversation, Barrett learns that the company’s most recent investment report was based on misappropriated information. No one at the Australian office expresses concern, however, because there has been no breach of Australian law. Barrett should:
A)
seek advice from company counsel to determine appropriate action.
B)
do nothing because the branch is outside of U.S. jurisdiction.
C)
disassociate himself from the case with a written report to his supervisor.


Kenny’s best choice is to seek the company counsel’s advice. If Kenny does nothing, he is breaching Standard I(A) Knowledge of the Law. Disassociation is not enough.
作者: kim226    时间: 2012-3-19 14:22

For an employee with the CFA designation who works for a firm, which of the following is NOT necessary to meet the requirements of the Code and Standards?
A)
It is recommended that their employer is aware of the Code and Standards.
B)
Deliver a copy of the Code and Standards to their employer.
C)
Recommend notifying their employer of their responsibility to follow the Code and Standards.


It is no longer required but recommended that CFA members and candidates notify their employer that they are required to follow the Code and Standards.
作者: kim226    时间: 2012-3-19 14:22

The Standards of Professional Conduct explicitly outlines responsibilities to four groups. Which of the following is NOT a group mentioned in that list?
A)
The Federal Reserve.
B)
The investing public.
C)
The profession.


The Standards explicitly mention responsibilities to the profession, employers, clients, prospects, and the investing public. The Federal Reserve is not mentioned.
作者: kim226    时间: 2012-3-19 14:23

Mary White, CFA, sits on the board of directors of XYZ Manufacturing, Inc. She discovers that management has knowingly participated in an activity she knows is illegal. According to the CFA Institute Standards of Professional Conduct, White is required to:
A)
disassociate herself from the activity.
B)
seek legal advice to determine what actions should be taken.
C)
both of these choices are correct.


Standard I(A), Knowledge of the Law. Prohibition against knowingly practicing or assisting in violation of laws, rules, and regulations. If White knows that someone has engaged in a possible illegal activity, she should: (1) report the finding to the appropriate supervisory person at her firm, (2) if the situation is not remedied, disassociate herself from the situation, and (3) seek legal advice to see what other actions, such as notifying the proper regulatory agency, should be taken.
作者: kim226    时间: 2012-3-19 14:23

If a CFA Institute member knows that a fellow employee has violated a law, according to Standard I(A) the member is NOT required to do which of the following?
A)
Seek legal advice.
B)
Report the employee violating the law to the appropriate supervisor in the firm.
C)
Report the employee violating the law to the appropriate governmental authority.


Standard I(A) does not require a CFA Institute member to report violations to governmental or regulatory agencies. The other answers are appropriate actions.
作者: kim226    时间: 2012-3-19 14:24

The SEC’s new stock-trading rule has just gone into effect. The SEC will give brokers a 10-day grace period, during which violators of the rule will be immediately notified and given a chance to remedy their situation to comply with the new rule. If a CFA Institute member unknowingly violates the rule and then remedies the situation within the 10-day grace period, has the member violated Standard I(A)?
A)
No, because the member remedied the situation.
B)
No, because the member unknowingly broke the rule.
C)
Yes, because the member did not maintain knowledge and know of the rule.


Standard I(A) explicitly says that a member shall maintain knowledge and comply with laws, rules, and regulations. By not knowing of the rule, the member broke the standard. If a CFA Institute member accidentally breaks a rule from a careless error and remedies the situation, this would not be a violation of Standard I(A).
作者: kim226    时间: 2012-3-19 14:24

Mega Securities, a multinational investment advisor based in the United States, employs the following analysts who practice in multiple jurisdictions.
According to the CFA Institute Code and Standards, which of the following statements about Black and White is CORRECT?
Black must adhere to theWhite must adhere to the
A)
Code and Standardslaw of Country S
B)
law of Country Llaw of Country S
C)
law of Country Nlaw of Country L


Because the applicable law in Country L is less strict than the Code and Standards, Black must adhere to the Code and Standards. Because the applicable law is stricter than the Code and Standards, White must adhere to the more strict applicable law of Country S.
作者: kim226    时间: 2012-3-19 14:25

A CFA Institute member is also a member and the portfolio manager of an environmentalist group. In its charter, the environmentalist group lists a group of companies its members should boycott. The CFA Institute member would violate Standard I(A) concerning obeying all rules and regulations if the member:
A)
purchases stock of a boycotted firm for the group's portfolio.
B)
performs either of the activities listed here.
C)
actively protests against a publicly traded firm boycotted by the group.


Standard I(A) says the member must be guided by all applicable rules and regulations of professional associations governing the member’s professional activities. Purchasing the stock for the firm would be a violation because it involves the member’s professional activities and the rules of a group to which the member belongs and works for. Actively protesting would not be covered by that standard.
作者: kim226    时间: 2012-3-19 14:25

Allen Parsons, a CFA candidate, suspects a colleague at his firm of engaging in an illegal activity. Which of the following statements about procedures for compliance involving Standard I(A), Knowledge of the law is NOT correct? Parsons:
A)
should urge his firm to attempt to persuade the perpetrator to cease such conduct.
B)
is required to report this legal violation to the appropriate governmental or regulatory organizations.
C)
should consult counsel to determine whether the conduct is, in fact, illegal.


Standard I(A), Knowledge of the law, does not require that Parsons report legal violations to the appropriate governmental or regulatory organizations, but such disclosures may be appropriate under certain circumstances.
作者: kim226    时间: 2012-3-19 14:25

Michael Bellow, CFA, CAIA, is an investment banker who is involved with an initial public offering (IPO) of NewCo. Because this is Bellow’s first involvement in an IPO, he reports to an experienced supervisor. While reviewing past financial statements provided by NewCo, Bellow suspects that NewCo deliberately overstated its earnings for the past several quarters. Bellow seeks the advice of his firm’s highly competent general counsel and follows the advice given without deviation. Based on the general counsel’s advice, Bellow consults his immediate supervisor about the suspected overstatement of earnings. After reviewing the situation, Bellow’s supervisor explains why NewCo’s calculations of its earnings are correct. Bellow realizes that his inexperience and exuberance initially led him to an incorrect conclusion about NewCo’s earnings.
Which of the following statements about Bellow’s actions involving Standard I(A), Knowledge of the law, and Standard I(C), Misrepresentation, is CORRECT? Bellow:
A)
violated both Standard I(A) and Standard I(C).
B)
did not violate either Standard I(A) or Standard I(C).
C)
violated Standard I(A) but did not violate Standard I(C).


Bellow did not violate Standard I(A), Knowledge of the law, because he sought advice of counsel and followed that advice. Bellow did not violate Standard I(C), Misrepresentation, because he made reasonable and diligent efforts to ensure the accuracy of the information and to avoid any material representation.
作者: karoliukas    时间: 2012-3-19 14:32

Robe Advisory Services operates an office in San Francisco, where it manages portfolios for its clients based in the United States. The firm also maintains an office in Tokyo, where it employs Sam Lee, CFA who researches Japanese stocks. According to the CFA Institute Standards of Professional Conduct, Lee is required to maintain knowledge of and comply with all applicable laws, rules, and regulations in:
A)
both the U.S. and Japan, but not the CFA Institute Standards of Professional Conduct.
B)
Japan, but not the U.S., and the CFA Institute Standards of Professional Conduct.
C)
both the U.S. and Japan and the CFA Institute Standards of Professional Conduct.


To abide by the Standards, employees who work for foreign-based firms are required to apply the stricter of the foreign (here, U.S.) law, the domestic (here, Japanese) law, or CFA Institute standards.
作者: karoliukas    时间: 2012-3-19 14:35

Sometimes a CFA Institute member simply feels a law has been violated by his firm, and sometimes the member knows a law has been violated. Which of the following pairs of guidelines is CORRECT with respect to the first step a member should take in each case? The member should first contact:
A)
the firm's counsel if he feels a law has been violated and contact his supervisor if he knows a law has been violated.
B)
the firm's counsel if he feels a law has been violated and the SEC if he knows a law has been violated.
C)
his supervisor in the firm if he feels a law has been violated and contact the firm's counsel if he knows a law has been violated.


Standard I(A) says that when a member feels a law has been broken, the member should seek advice from the firm’s counsel. If the member feels the advice is unbiased and competent, the member should follow it. If the member knows a law has been violated, the member should contact a supervisor.
作者: karoliukas    时间: 2012-3-19 14:36

Bob Blanford, CFA, is an investment analyst for a large global brokerage firm. He recently moved to Ragatan, a developing country with few securities laws and regulations. As part of conducting a company analysis, Blanford interviews Ravi Shanti, vice-president of finance at Starr Industries. Starr is a major industrial firm in Ragatan and a client at Blanford’s firm. Based on his analysis, Blanford suspects that Shanti may have deliberately overstated Starr’s current earnings and its earnings for the past several quarters. If this information becomes public, Blanford believes that Starr’s stock price will drop substantially. Blanford suspects that Shanti may have violated Ragatan’s securities laws. Which of the following statements is least likely to comply with Standard I, Professionalism? Blanford should:
A)
take no action.
B)
determine the legality of the activity, possibly by consulting counsel.
C)
disassociate himself from the client, if the activity is illegal or unethical.


Because Blanford suspects Shanti of engaging in ongoing illegal activities, Blanford should take action by determining the legality of the suspected action, disassociating from any illegal activity, and urging his firm to attempt to persuade Shanti to cease such conduct if such an activity is illegal or unethical.
作者: karoliukas    时间: 2012-3-19 14:37

Shortly after becoming employed by Valco & Co., an investment banking firm, Stan McDowell, CFA, learns that most of Valco's initial public offerings (IPO) are really effected in order to profit management via price manipulation of the shares. McDowell observes an illegal act, sanctioned by senior management, in progress and refuses to sign off on his responsibility. Instead, McDowell takes the documentation to his supervisor and tells him he should sign it in his place. This action is:
A)
a violation of the Code and Standards since he is required not to knowingly participate or assist in such an act.
B)
an overreaction. Senior management's sanctioning of the act absolves McDowell from his ordinary responsibility as a CFA Institute member.
C)
a suitable reaction, and he is in compliance with the Code and Standards.


McDowell, by his action in taking the documentation to his supervisor, is knowingly participating in and/or assisting in an illegal act. This is clearly prohibited under Standard I(A), and he is in violation of the Standard.
作者: karoliukas    时间: 2012-3-19 14:38

An analyst is told by his supervisor that when he feels he should write a buy recommendation he is free to do so, and when he feels he should write a sell recommendation he should check with the supervisor first. This practice is:
A)
in violation of Standard I(B), Independence and Objectivity.
B)
congruent with Standard V(A), Diligence and Reasonable Basis.
C)
in violation of Standard V(A), Diligence and Reasonable Basis.


The policy dictated by the supervisor would infringe upon the analyst’s independence and objectivity . It would probably discourage the analyst from making sell recommendations and, furthermore, present the opportunity for the supervisor to try and change the analyst’s mind.
作者: karoliukas    时间: 2012-3-19 14:38

Joshua Rosenberg, CFA, is an equity analyst who covers Northwest Implements, a farm implement manufacturer. Northwest's main factory is located in a sparsely inhabited region six hours by automobile from the nearest airport. Northwest has its own corporate jet and a landing strip is located near the facility. When Rosenberg contacts Northwest’s management to gather information for a report he is preparing on the company, Northwest’s chief financial officer, Thomas Blake, invites Rosenberg to visit Northwest’s headquarters and meet with management. Blake offers to send Northwest’s corporate jet to pick up Rosenberg from an airport near Rosenberg’s home and to return him home the same evening. Rosenberg estimates that it would require three days for him to make the visit using commercial travel. If Rosenberg accepts Blake’s offer and makes the trip to Northwest’s headquarters on the corporate jet, Rosenberg:
A)
has violated the Code and Standards unless he discloses the trip and the payment of his travel expenses in his report on Northwest.
B)
has violated the Code and Standards unless he reimburses Northwest for the cost of the trip.
C)
has not violated the Code and Standards.


Standard I(B) requires members to maintain independence and objectivity. A visit by an analyst to an out-of-the-way site may be paid for by a client company host as long as the analyst can maintain objectivity. Members should encourage clients to limit the use of corporate aircraft, but exceptions can be made if transportation would not otherwise be available or would be inefficient.
作者: karoliukas    时间: 2012-3-19 14:39

Luis Rodriguez, CFA, is an analyst at XYZ Investments. He covers a company that is located in a region that is not easily accessible. The company invites analysts for their annual analyst meeting and pays for the transportation to the remote location. Rodriguez is:
A)
allowed to accept the payment for transportation as long as it does not exceed $100.
B)
allowed to accept the payment for transportation because the trip was all business and was out of the way.
C)
not allowed to accept the payment for transportation because this is a considered a “perk” and may influence his independent judgment.


Standard I(B) Independence and Objectivity. Analysts should pay for their own travel accommodations if the location is accessible by normal means. In this situation payment is acceptable because the location is out of the way and the purpose of the trip is all business.
作者: karoliukas    时间: 2012-3-19 14:39

In order to comply with the CFA Institute Standards, an analyst should:
A)
use only his own research in making investment recommendations, because anything else would violate Standard I(B), Independence and Objectivity.
B)
use only his company's research when making investment recommendations and use outside research for reports and analysis on stocks.
C)
use outside research only after verifying its accuracy.


Standard I(B), Independence and Objectivity: the analyst is allowed to use outside research only after an insightful review. There are no restrictions regarding the exclusive use of outside information or in-house information.
作者: karoliukas    时间: 2012-3-19 14:39

All of the following would be permitted according to the CFA Institute Standards of Professional Conduct EXCEPT:
A)
air transportation paid by a corporate issuer for travel to a major metropolitan airport.
B)
token gifts received from clients.
C)
use of an issuer’s corporate aircraft when commercial transportation is not available.


In order to maintain independence and objectivity, members and candidates should restrict special reimbursement arrangements concerning commercial transportation and hotel charges. Use of corporate aircraft is permitted when commercial transportation is not available.
作者: karoliukas    时间: 2012-3-19 14:40

Which of the following gifts to employees from clients does NOT need to be reported to the employee’s employer?
A)
An expensive case of wine.
B)
An inexpensive golf shirt.
C)
A ski-vacation.


According to Standard I(B), Independence and Objectivity, token gifts are allowed.
作者: karoliukas    时间: 2012-3-19 14:40

Tony Calaveccio, CFA, is the manager of the TrustCo Small Cap Venture Fund in Toronto. He places trades for the fund with Worldwide Brokerage. Worldwide is holding a conference in Amsterdam and has offered to pay for Calaveccio's airfare, meals, and accommodations associated with his attendance of the conference. The conference concerns European small cap securities and the EASDAQ. He decides that he will accept their offer and attend the conference. In order to comply with the Code and Standards, he:
A)
should not attend unless he pays for the trip himself.
B)
may attend, but he must disclose the arrangement to TrustCo's clients and prospects as required under Standard IV.B.
C)
may attend, but he must disclose the arrangement to his employer as a gift.


Under Standard I(B) gifts, benefits, compensation, or consideration cannot be accepted if the purpose was to influence or reward. Token items are OK. Worldwide Brokerage is not a client of Calaveccio but an entity that he does business with. As such Worldwide could influence Calaveccio to always do business with them which could be to the detriment of his fund if the execution of their trades starts to deteriorate compared to their competitors.
作者: karoliukas    时间: 2012-3-19 14:41

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.


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.
作者: karoliukas    时间: 2012-3-19 14:41

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.


Nielsen is not in violation of Standard I(B) "Independence and Objectivity" because commercial travel is effectively unavailable.
作者: karoliukas    时间: 2012-3-19 14:42

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."


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.
作者: karoliukas    时间: 2012-3-19 14:42

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.


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.
作者: karoliukas    时间: 2012-3-19 14:42

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


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.
作者: karoliukas    时间: 2012-3-19 14:43

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.


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.
作者: karoliukas    时间: 2012-3-19 14:43

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.


The current yield curve is factual information that is available from many recognized financial or statistical reporting services.
作者: karoliukas    时间: 2012-3-19 14:44

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.


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.
作者: karoliukas    时间: 2012-3-19 14:44

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.


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.
作者: mouse123    时间: 2012-3-19 14:57

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.


To avoid potential problems and comply with Standard I(D), employers are encouraged to conduct background checks on potential employees.
作者: mouse123    时间: 2012-3-19 14:58

Which of the following is least likely a violation of Standard I(D), Misconduct? Being:
A)
convicted of a misdemeanor traffic offense.
B)
intoxicated at the office.
C)
convicted of a felony.


According to Standard I(D)" Members shall not engage in any professional conduct involving dishonesty, fraud, deceit, or commit any act that reflects adversely on their professional reputation, integrity, or competence.." The standard is not intended to regulate one’s personal behavior.
作者: mouse123    时间: 2012-3-19 14:59

Which of the following actions most likely violates Standard I(D) Misconduct?
A)
A Level I candidate is ejected from a hotel for attempting to pass a bad check.
B)
A member’s market forecasts have been wrong in three consecutive quarters, prompting a formal complaint from a client.
C)
A member pursues an employment opportunity with a competing firm, primarily as a means of securing a salary increase from her current employer.


Any activity that reflects adversely on a member’s professional reputation, integrity, or competence is a violation of Standard I(D) Misconduct. As long as the member has a reasonable and adequate basis for all recommendations, simply being wrong does not call the member’s integrity or competence into question. A member can pursue an employment opportunity with a competitor as long as the member abides by the Standards related to Duties to Employers.
作者: mouse123    时间: 2012-3-19 14:59

Nancy Hall, a candidate in the CFA program, is an analyst for a mutual fund. As part of her job she makes company visits to interview executives. On a recent trip she stayed with her sister instead of at a hotel. In her expenses Hall included a hotel charge of $100, which was less than the amount allowed by her employer. After receiving a check for her expenses, Hall disclosed to her supervisor that she had stayed with her sister instead of at a hotel. She also returned the $100 to her employer. According to CFA Institute Standards of Professional Conduct, which of the following statements best describes Hall's professional conduct?
A)
Hall did not engage in professional misconduct because she eventually disclosed this information and returned the $100 to her employer.
B)
Hall did not engage in professional misconduct because she did not meet all of the requirements to use the CFA designation.
C)
Hall engaged in professional misconduct.


Hall engaged in professional misconduct because her act involved dishonesty, fraud, and deceit.
作者: mouse123    时间: 2012-3-19 14:59

Hillary Jones, CFA, sometimes promises clients that she will allocate more shares from oversubscribed initial public offerings (IPOs) than she knows she will actually be able to deliver. Her employer has reprimanded her in the past for similar behavior. Which of the following statements is least accurate regarding Jones' behavior?
A)
Her actions are a violation of the Standards only if prosecution results in a felony conviction.
B)
Her actions are a violation of the standard concerning misrepresentation, because she promised something she knew the firm could not deliver.
C)
Her actions are a violation of the standard concerning professional misconduct because she deceived her clients.


Jones violated Standard I(C) Misrepresentation by promising clients she would allocate more shares than she could deliver. Her actions also violated Standard I(D) Misconduct pertaining to acts of dishonesty, fraud, or deceit which reflects adversely on a member's professional reputation, integrity, or competence. She also violated the Code of Ethics which states that members and candidates must act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, and prospective clients. The specific punishment for the actions is not relevant.
作者: mouse123    时间: 2012-3-19 15:00

Which of the following are recommended procedures of compliance according to Standard I(D), Misconduct?
A)
All of these choices are correct.
B)
Conduct background checks on potential employees to ensure that they are of good character.
C)
Enroll employees in a continuing education program that would provide updates on required ethical behavior.


According to Standard I(D) Misconduct - Procedures for Compliance: Members should encourage their employers to conduct background checks on potential employees to ensure that they are of good character and eligible to work in the investment industry.
作者: mouse123    时间: 2012-3-19 15:00

An investment advisor takes a trip for which his firm will pay the expenses. Upon his return he alters some of the numbers on restaurant receipts to inflate the expenses by $64. Is this a violation of Standard I(D)?
A)
Yes, because it reflects adversely on the charterholder’s professional reputation.
B)
No, if such a crime carries less than a one-year prison term.
C)
Yes, because the amount involved is over $50.


Professional conduct involving dishonesty, fraud, or deceit is a direct violation of Standard I(D), Misconduct.
作者: mouse123    时间: 2012-3-19 15:01

All of the following are violations of Standard I(D), Misconduct, EXCEPT:
A)
conviction of a crime involving fraud.
B)
any conduct that undermines confidence that the CFA charter represents a level of achievement based on merit and ethical conduct.
C)
conviction of a misdemeanor involving civil disobedience in support of one’s personal beliefs.


The Code and Standards do not focus on personal conduct as long as the conduct does not reflect poorly on one’s professional reputation, integrity, or competence.
作者: mouse123    时间: 2012-3-19 15:04

Trude Front, CFA, is a portfolio manager. While in the normal course of her duties, she happens to overhear material non-public information concerning the stock of VTT Bowser. She purchases several exchange traded funds which contain VTT Bowser, while shorting similar exchange traded funds which do not contain VTT Bowser. This is most likely:
A)
not a violation of Standard II(A) "Material Non-Public Information."
B)
only a violation of Standard II(A) "Material Non-Public Information" because Front is simultaneously shorting the funds which do not contain VTT Bowser.
C)
a violation of Standard II(A) "Material Non-Public Information."


This is a violation of Standard II(A) "Material Non-Public Information" irrespective of whether Front is simultaneously shorting the funds which do not contain VTT Bowser. Her trades are motivated by material non-public information.
作者: mouse123    时间: 2012-3-19 15:05

Lisa Pierce, CFA, has been researching Lander Manufacturing for the past three weeks. She likes the company’s history of fulfilling its contracts on time and within budget. She learns from the uncle of a maintenance worker at Lander’s headquarters that a group of well-dressed individuals arrived at headquarters in a lime green-colored limousine. Pierce knows from publicly available information that Gilbert Controls needs a large supply of specialized motors in its domestic division. She also knows that the executive officers of Gilbert usually travel in a lime green limousine. Pierce concludes that it is very likely that Gilbert will offer a large contract to Lander. Based on this development and her prior research Pierce would like to acquire Lander Manufacturing shares for her client accounts.
Pierce should:
A)
not acquire the shares because she possesses material nonpublic information.
B)
proceed to acquire the shares.
C)
not acquire the shares until after she has contacted Lander's management and encouraged them to publicly announce information about the Gilbert Controls contract. She should also wait until Lander has made the announcement and the public has had time to react to it and then make the acquisition.


Standard II(A) prohibits members from taking investment action if they possess material nonpublic information. Pierce combined information that was not misappropriated, with her knowledge of the company, to reach a conclusion under the mosaic theory, which is permissible under the standards. She can proceed to buy the shares.
作者: hinsafdar    时间: 2012-3-20 10:08

Jason Reynolds meets Jack Parker, CFA, at a social engagement and asks for some "hot stock tips." Parker declines, but sets up an appointment to review Reynolds’ risk and return objectives and financial constraints. At the conclusion of their appointment, Parker recommends three securities he has thoroughly researched: ACK, D-Wing, and Ophus-Littbinger. Parker is least likely:
A)
in violation of Standard III(A) "Loyalty, Prudence, and Care" for failing to consider the three securities in the context of the whole portfolio.
B)
not in violation.
C)
in violation of Standard III(A) "Loyalty, Prudence, and Care" for failing to make a reasonable inquiry into the client’s investment experience.


Standard III(A) "Loyalty, Prudence, and Care" requires Parker to make a reasonable inquiry into the client’s investment experience, risk and return objectives, and financial constraints. Investment decisions must be made based on a total portfolio approach, rather than the quality of an individual investment in isolation.
作者: hinsafdar    时间: 2012-3-20 10:09

Heidi Krueger, CFA, an investment advisor, applies soft dollars generated from client accounts to purchase a report on the economic impact of world events, and to purchase a new conference table for the office she uses to meet with clients and prospects. Do these purchases violate Standard III(A) Loyalty, Prudence, and Care?
A)
Both of these purchases violate the Standard.
B)
Neither of these purchases violates the Standard.
C)
Only one of these purchases violates the Standard.


Using soft dollars for the purchase of office furniture does not benefit clients and is a violation. Purchasing research reports with soft dollars is not a violation, but the advisor should ensure that research purchased with client brokerage will benefit her clients.
作者: hinsafdar    时间: 2012-3-20 10:09

According to Standard III(A) Loyalty, Prudence and Care, brokerage is an asset of the:
A)
managing firm.
B)
brokerage firm conducting the trades.
C)
client.


Brokerage is an asset of the client.
作者: hinsafdar    时间: 2012-3-20 10:09

Bertha Mader, CFA, received proxy material related to a hostile takeover attempt of Danube Industries by Balnet Company. She holds shares of Danube in most of her client accounts. Mader has a high opinion of Danube’s management because they have run the company successfully and have always responded directly and honestly to her inquiries. She is not acquainted with Balnet’s management team but knows they have a reputation for improving the bottom line at the companies they acquire, partly because they tend to replace upper management at their targets and assume their functions. Balnet's offer is 60% higher than the price of Danube shares before the announcement. Danube’s management has contacted Mader and requested that she vote the shares she controls against the takeover because the management is concerned for their jobs and for the welfare of the company. To comply with the Code and Standards, Mader should:
A)
vote for the takeover if she can get assurance that Danube's management team will remain in place.
B)
vote for the takeover if it is in the best interest of Danube's shareholders, regardless of the consequences to current management.
C)
delegate her proxy vote to another member of her firm due to the conflict of interest created when she was contacted by management.


Standard III(A), Loyalty, Prudence, and Care, requires that members act for the benefit of their clients. Mader’s duty is to her clients, who are shareholders of Danube. She has no duty to Danube’s management, nor to the company itself, and must vote the shares accordingly.
作者: hinsafdar    时间: 2012-3-20 10:10

Which of the following is least likely required of fiduciaries who are responsible for pension plans?
A)
Supporting the sponsor's management during proxy fights.
B)
Judging investments in the context of the total portfolio.
C)
Acting solely in the interest of plan participants.


Under Standard III(A) Loyalty, Prudence, and Care, fiduciaries must evaluate management’s proposals during proxy fights to see if they are in the best interest of the plan participants. If management’s ideas are justifiable and reasonably ensure plan participants’ betterment, then fiduciaries can support them. If management is only trying to further its own objectives, especially at the cost of plan participants, then fiduciaries must vote against management in proxy fights.
作者: hinsafdar    时间: 2012-3-20 10:10

All of the following are required by fiduciaries under Standard III(A), Loyalty, Prudence, and Care, EXCEPT:
A)
act solely in the interest of the ultimate beneficiaries.
B)
support the sponsor's management during proxy fights.
C)
place the client’s interest before the employer’s interest.


Members are required to act in the interest of their clients. In voting proxies, the client’s interest must prevail over management’s interest.
作者: hinsafdar    时间: 2012-3-20 10:11

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 provides Calaveccio with soft dollars to purchase research. River City also deals in municipal bonds, some of which Calaveccio holds in his personal portfolio. He periodically uses the soft dollars to request research reports on various small cap stocks and also on the status of the municipal bond market and issues that he holds. These actions are:
A)
in violation of his fiduciary duties regarding the municipal bond research but not so regarding the research on the small cap issues.
B)
not in violation of the Code and Standards.
C)
in violation of his fiduciary duties regarding both the small cap research and the municipal bond research.


The issue at hand is the member's fiduciary responsibilities in handling "soft dollars" which are technically the property of the client. Standard III(A), Loyalty, Prudence, and Care, delineates the member's fiduciary responsibilities with regard to soft dollars. Since municipal bond research is clearly not relevant to the Small Cap Fund holders, he is clearly using the soft dollars to obtain research for his personal benefit and is in violation of the Standard.
作者: hinsafdar    时间: 2012-3-20 10:11

Which of the following is a possible breach of fiduciary duties by a CFA Institute member who manages assets on behalf of a client?
A)
Voting all proxies of stocks the client owns.
B)
Using directed brokerage.
C)
Neither of these breach fiduciary duties.


Proxies have economic value to the client. To comply with Standard III(A), the analyst is obligated to vote proxies in an informed and responsible manner. A cost benefit analysis may show that voting all proxies may not benefit the client, so voting proxies may not be necessary in all instances. Directed brokerage occurs when the client requests that a portion of the client's brokerage be used to purchase services that directly benefit the client. Although, this may prevent best execution, it does not violate the Standards as it was directed by the client, not the brokerage firm.
作者: hinsafdar    时间: 2012-3-20 10:11

An analyst with his own money management firm trades on behalf of several large pension funds. The analyst now performs all trades through a particular brokerage firm because the brokerage provides his firm with a no-interest line of credit if paid within 60 days. The line of credit is available to all brokerage clients. The brokerage provides the analyst with personal account privileges that he would not otherwise be eligible for. The brokerage also provides the analyst with free research reports on many companies. Which of these benefits are violations of Standard III(A), Loyalty, Prudence, and Care?
A)
The personal account privileges.
B)
Neither of these.
C)
The research reports.


The personal account privileges are clearly a violation. The no-interest line of credit could be a violation if the analyst does not factor in the benefits when determining the fees of the clients, but it is not a per se violation. Research reports are least likely to be a violation.
作者: hinsafdar    时间: 2012-3-20 10:12

An independent analyst has only one client. One of the client’s largest holdings is a brokerage firm. Because of the large holding by his client, the brokerage firm recently began allowing the analyst to tap into the firm’s computer network to use the firm’s research facilities. This is allowable as long as the analyst:
A)
does both of the actions listed here.
B)
uses the resources to help manage the client's account.
C)
discloses the relationship to the client.


According to Standard III(A), Loyalty, Prudence, and Care, the analyst must put the client first and inform the client of any possible conflicts of interest. The analyst must channel any benefits derived from his service to the client, back to the client, and inform the client of the benefits.
作者: hinsafdar    时间: 2012-3-20 10:12

Tony Calaveccio, CFA, is the manager of the TrustCo Small Cap Venture Fund in Toronto. Calaveccio places a trade with Quantco Brokerage. While Calaveccio's part of the transaction was conveyed correctly to Quantco, there was a trading error made in Calaveccio's account due to a slip up within Quantco. Calaveccio realizes that the error has taken place, and informs his contact at Quantco. Calaveccio allows Quantco to cover the error, with no cost to TrustCo. This is:
A)
permissible under CFA Institute Standards since some trading errors are a fact of life in the securities industry.
B)
a violation of Calaveccio's duty to his employer.
C)
a violation of Calaveccio's fiduciary duties.


The issue is similar to an allocation of soft dollars. Clearly, if the broker absorbs the loss, they expect to make up the difference in some way. However, since the error was on the part of Quantco Brokerage, Calaveccio is under no obligation to cover the cost of the trading error. Moreover, no reasonable observer expects that there exists any implied future allocation of trades to Quantco in return for correcting their own mistake. There is no violation of Standard III(A), Loyalty, Prudence, and Care.
作者: hinsafdar    时间: 2012-3-20 10:12

While trading on behalf of a pension account, an analyst receives special research reports from the brokerage firm with whom she is doing the trades. Such an activity is:
A)
not in itself a violation of Standard III(A), Loyalty, Prudence, and Care, nor the Code of Ethics.
B)
a violation of only The Code of Ethics.
C)
a violation of both Standard III(A), Loyalty, Prudence, and Care, and the Code of Ethics.


An analyst can receive research from a brokerage firm with whom she is trading on behalf of a client. The analyst should inform the client of the arrangement. The client is more likely to violate Standard III(A) by obtaining non-research services or, worse yet, personal benefits from the brokerage firm.
作者: hinsafdar    时间: 2012-3-20 10:13

Alan Cramer, CFA, practices in a country that does not regulate the investment of company retirement plans. He was retained by Bingham Companies to manage their corporate pension plan. Bingham’s management has approached Cramer and requested that Cramer invest the entire plan in Bingham stock.Cramer may:
A)
invest a portion of the retirement plan in Bingham Company stock if the investment is prudent and if he keeps the overall portfolio properly diversified.
B)
not invest any of Bingham Company's retirement plan in its own stock regardless of the stock's prospects and in spite of management's request.
C)
invest all of the retirement plan assets in Bingham Company stock according to management's request only if Cramer can document that the investment is more prudent than any other investment opportunity he finds.


Standard III(A), Loyalty, Prudence, and Care, requires members to comply with their fiduciary duty. Retirement plan managers owe their duty to the plan participants, not to the management of the company sponsoring the plan. The fiduciary duty includes the obligation to diversify the plan’s investments, regardless of the quality of the sponsoring company’s stock. Investing in the company’s stock is not prohibited.
作者: hinsafdar    时间: 2012-3-20 10:13

Calvin Moore, CFA, has been transferred from the brokerage house of the Browning Company to the portfolio management department. In portfolio management, Moore learns that clients are grouped into three divisions according to portfolio value, divided as follows:When recommendations are announced or trades are initiated, a particular sequence is followed in communicating to these groups. At the next monthly meeting, Moore suggests that the sequencing practice is a breach of CFA Institute Standards. One of Moore’s co-workers replies that the grouping approach helps the company in applying the Standard regarding portfolio recommendations.  He further suggests that because Browning’s overall performance is more strongly affected by actions taken on the high value portfolios, that these portfolios should take priority over the small value portfolios. What should Moore do?  Moore should:
A)
do nothing since there is no breach with the Standards.
B)
disassociate himself from the problem and seek legal advice.
C)
prepare a written report to the CEO describing the problem.


Taking a special approach in disseminating information in relation to initiating trades is a breach of Standard III(B), Fair Dealing. Given the fact that Moore works in the department and has already unsuccessfully tried to prevent the practice from continuing, he needs to disassociate himself and seek legal advice.
作者: hinsafdar    时间: 2012-3-20 10:14

Bjorn Sandvik, CFA, completes a research report with a buy recommendation for Acorn Properties. In the early afternoon, Sandvik e-mails this recommendation to his clients who had responded to his request that they provide Sandvik with their e-mail addresses. Later that afternoon, the printed recommendation is forwarded to the postal service for normal delivery to all customers, who receive the mailing 1 to 3 days later. Sandvik has:
A)
not violated the Code and Standards because he acted fairly in disseminating research information to his clients.
B)
violated the Code and Standards by sending the e-mail recommendation to only some of his clients.
C)
violated the Code and Standards by sending the e-mail recommendation in advance of the printed report.


Standard III(B) Fair Dealing requires that members deal fairly with all clients in disseminating investment recommendations. It does not require uniform or equal treatment. Sandvik’s approach in sending e-mail correspondence to those of his clients who had given him their e-mail addresses, having made the request to all of his clients, and sending regular mail correspondence the same day, is fair to all of his clients.
作者: hinsafdar    时间: 2012-3-20 10:14

Which of the following most accurately states a limitation that the Fair Dealing standard imposes?
A)
Referral fees may be disclosed after proceeding with an agreement for service.
B)
Clients should not be discriminated against when disseminating investment recommendations.
C)
Before trading on her own portfolio, a CFA charterholder must wait for employer and client deals to be executed.


Standard III(B) Fair Dealing states that the dissemination of information and recommendations to clients must be handled fairly. The other choices are related to Standard VI(B) Priority of Transactions and Standard VI(C) Referral Fees.
作者: hinsafdar    时间: 2012-3-20 10:14

Rey Sanchez, CFA, covers the specialty chemical industry for Rock Advisory Associates. Until today he has had a buy recommendation on ChemStar, and many of the firm’s customers have purchased shares based upon his recommendation. The firm’s client accounts are divided into two fundamental categories: trading and buy-and-hold accounts. The firm holds discretionary trading authority over the trading accounts, but not the buy-and-hold accounts. Sanchez has recently come to believe that the fundamentals are changing for the worse at ChemStar, and is preparing a sell recommendation. He calls a meeting of the firm’s portfolio managers with accounts holding ChemStar and tells them of the pending release of the sell recommendation. On this basis, the portfolio managers sell all positions in the discretionary accounts but not in the buy-and-hold accounts. Sanchez completes and mails the report to all clients two days later, and, shortly thereafter, many of the buy-and-hold accounts sell their ChemStar positions. With regard to these actions, Sanchez is:
A)
in violation of the Standard on Fair Dealing; the portfolio managers are in violation of the Standard on Fair Dealing.
B)
not in violation of the Standard on Fair Dealing; the portfolio managers are in violation of the Standard on Fair Dealing.
C)
in violation of the Standard on Fair Dealing; the portfolio managers are not in violation of the Standard on Fair Dealing.


Sanchez is in violation of the Standard III(B), Fair Dealing, since he has disseminated his recommendation preferentially to the portfolio managers in advance of making the report available to all clients who hold shares of ChemStar. The portfolio managers are in violation of the Standard since they are effectively giving preferential treatment to the trading accounts over the buy-and-hold accounts in the placement of orders based upon the change in recommendation.
作者: hinsafdar    时间: 2012-3-20 10:15

Concerning Standard III(B), Fair Dealing, which of the following actions is NOT a valid procedure for compliance with the Standard?
A)
Limit the number of people that are involved and are privy to the fact that an investment recommendation is going to be disseminated.
B)
Communicate investment recommendations to all customers including those accounts for which the securities are not eligible for purchase.
C)
Communicate investment recommendations simultaneously within the firm and to customers, where possible.


To ensure compliance with the Standard, members should seek to communicate investment recommendations to all clients who have indicated an interest and also those for whom the securities are suitable. There is no need to communicate recommendations to clients for whom the securities are deemed unsuitable.
作者: hinsafdar    时间: 2012-3-20 10:17

Which of the following statements regarding allocating trades is CORRECT? It is permissible under the Standards to allocate trades:
A)
on a pro-rata basis over all suitable accounts.
B)
based upon compensation arrangements.
C)
based upon any method the firm deems suitable so long as the allocation procedure has been disclosed to all clients.


It is permissible to allocate trades on a pro-rata basis over all suitable accounts. It is not permissible to base allocations upon compensation arrangements. Any method is not necessarily suitable, and disclosure does not absolve the member from ensuring that the allocation is necessarily fair.
作者: hinsafdar    时间: 2012-3-20 10:17

In securing the shares for all accounts under her management, Linda Kammel of Northwest Futures purchased three blocks of shares at three different prices. She then allocated these shares by placing shares from the first block in accounts with surnames beginning with A-G. The second was allocated over accounts H-P, and the third over Q-Z. This action is:
A)
consistent with her responsibilities under the Code and Standards.
B)
permissible only if the clients are informed of the allocation procedure.
C)
not permissible under the Code and Standards.


Standard III(B) requires a member to deal fairly with all clients when taking investment actions. Since she knew at the outset that she was going to place shares in all accounts, regardless of the first letter of the surname, all accounts must participate on a pro-rata basis in each block in order to conform to the Standard. Her actions constitute a violation of the Standard concerning fair dealing.
作者: prashantsahni    时间: 2012-3-20 10:19

A money management firm has the following policy concerning new recommendations: When a new recommendation is made, each portfolio manager estimates the likely transaction size for each of their clients. Clients are notified of the new recommendation in the order of their estimated transaction size—largest first. All clients have signed a form where they acknowledge and consent to this allocation procedure. With respect to Standard III(B), Fair Dealing, this is:
A)
not a violation because the clients have signed the consent form.
B)
a violation of the standard.
C)
not a violation because the clients are aware of the policy.


Such a policy is a violation of the Standard and client acknowledgement and/or consent does not change that fact.
作者: prashantsahni    时间: 2012-3-20 10:19

Which of the following statements is least accurate regarding being a part of Standard III(B), Fair Dealing?
A)
Shorten the time between decision and dissemination.
B)
At the same time notify clients for whom an investment is suitable of a new investment recommendation.
C)
Maintain a list of clients and their holdings.


All of these are part of Standard III(B) except notifying clients at the same time. Standard III(B) states that clients for whom the investment is suitable should be notified at approximately the same time.
作者: prashantsahni    时间: 2012-3-20 10:19

An investment advisor goes straight from a research seminar to a meeting with a prospective new client with whom she has never been in contact. The advisor is very excited about the information she just received in the seminar and begins showing the prospect the new ideas her firm is coming up with. This is most likely a violation of:
A)
both of these.
B)
Standard III(B), Fair Dealing.
C)
Standard III(C), Suitability.


It is a violation of Standard III(B) because the advisor should act first on behalf of existing clients whose needs and characteristics she already knows. It is a violation of Standard III(C) because she has never met the prospect and does not know if the new ideas are appropriate for the prospect. Thus, “both of these” is the best response.
作者: prashantsahni    时间: 2012-3-20 10:20

An analyst meets with a new client. During the meeting, the analyst sees that the new client’s portfolio is heavily invested in one over-the-counter stock. The analyst has been following the stock and thinks it will perform well in the long run. The analyst arranges through a brokerage firm to simultaneously sell a large number of shares of the stock via a series of cross trades from the new client’s portfolio to various existing clients. He arranges the trades to be executed at a price that approximates the current market price. This action is:
A)
a violation of Standard III(A), Loyalty, Prudence, and Care.
B)
a violation of Standard III(B), Fair Dealing.
C)
not in violation of the Standards.


There is no violation. It is in the best interest of the client to be diversified and selling via a series of cross trades will likely reduce price impact costs when compared to selling directly into the market. The analyst appears to have reasonable basis for putting the securities in the accounts of other clients.
作者: prashantsahni    时间: 2012-3-20 10:20

Which of the following would be a violation of Standard III(B), Fair Dealing?
A)
Trading for regular accounts before discretionary accounts.
B)
Having well defined guidelines for pre-dissemination.
C)
Limiting the number of employees privy to recommendations and changes.


Do not discriminate against a client when disseminating investment recommendations. If the firm offers different levels of service, this fact must be offered and disclosed to all clients. The other choices are necessary parts of the Standard. The Standard actually says to have published personal guidelines for pre-dissemination, which implies that the guidelines be well-defined.
作者: prashantsahni    时间: 2012-3-20 10:20

All of the following are violations of Standard III(B), Fair Dealing, EXCEPT a member:
A)
places a trade for the firm account before issuing a buy recommendation.
B)
places a trade for her discretionary accounts before placing a trade for her non-discretionary accounts.
C)
telephones clients in distant cities the day after a buy recommendation is mailed to all clients because their mail service is later than the member's local clients.


Standard III(B) states, "Members shall deal fairly and objectively with all clients and prospects when providing investment analysis, making investment recommendations, taking investment action, or in other professional activities.”
The term “fairly” implies that members should take care not to discriminate against a client when disseminating investment recommendations. All the responses, except for the telephoning of distant clients (which has the effect of putting them in the same position as local clients), describe a situation in which a client or group of clients is receiving preferential or detrimental treatment that is unfair.
作者: prashantsahni    时间: 2012-3-20 10:21

Lance Tuipulotu, CFA, manages investments for 400 individuals and families and often finds his resources stretched. When his largest investors petition him to include a 5% to 7% allocation of non-investment-grade bonds in their portfolios, he decides he needs additional help to meet the request. He considers various independent advisors to use as submanagers, but determines that the most qualified advisors would be too expensive. Reasoning that a lower-cost provider would enable him to pass the savings along to his clients, he chooses that provider to invest the new bond allocation. Tuipulotu has violated:
A)
Standard III(C) "Suitability" by failing to consider the appropriateness of the non-investment-grade bonds.
B)
Both Standard III(C) "Suitability" and Standard V(A) "Diligence and Reasonable Basis."
C)
Standard V(A) "Diligence and Reasonable Basis" by letting fee structure determine the selection of the submanager.


Both Standard III(C) "Suitability" and Standard V(A) "Diligence and Reasonable Basis" were violated. Tuipulotu must perform a full IPS review to determine the appropriateness of the new portfolio allocations. Submanagers should not be selected by cost structure alone, as the quality and appropriateness of the submanager is Tuipulotu’s responsibility.
作者: prashantsahni    时间: 2012-3-20 10:21

Millie Walker, CFA, established an aggressive growth portfolio for her client, Jesse Wilmer, over three years ago. Wilmer was placed on Walker’s employer’s client mailing list, and received monthly account statements and the firm’s newsletter, which regularly informed clients that they should contact their account representative with any change in their personal circumstances or investment objectives. As of January, of this year, Walker had not spoken to Wilmer nor received any correspondence from Wilmer since the account was established. Walker has:
A)
violated the Code and Standards because the manager has not performed an update of Wilmer's financial situation and investment objectives.
B)
not violated the Code and Standards because Wilmer has been reminded regularly about the opportunity to inform Walker about any changes.
C)
not violated the Code and Standards because there has been regular correspondence from Walker's firm to Wilmer.


Standard III(C) Suitability requires members to update a client’s financial situation and investment objectives regularly. Wilmer’s account has existed for more than three years, and an update is long overdue. Generally offering to do an update is not sufficient to comply with the Standard.
作者: prashantsahni    时间: 2012-3-20 10:22

Stephen Rangen, a broker, has three accounts consisting of unsophisticated, inexperienced individual investors with limited means.  One of these accounts is an elderly couple.  The clients want to invest in safe, income-producing investments. They rely heavily on Rangen’s advice and expect him to initiate most transactions in their respective accounts. In managing their accounts, Rangen pursues the following strategies: (1) buys U.S. treasury strips and non-dividend paying over-the-counter (OTC) stocks recommended by his firm's research department, (2) uses margin accounts, and (3) concentrates the equity portion of their portfolio in one or two stocks.  Rangen’s approach leads to extremely high turnover rates in all three accounts.Which of the following statements about Rangen is NOT correct?
A)
Rangen's conduct violates Standard IV(B), Additional Compensation Arrangements.
B)
Rangen has a fiduciary duty to each client.
C)
Rangen's conduct violates Standard III(C), Suitability.


No information in the case suggests that Rangen’s conduct violates Standard IV(B), Disclosure of Additional Compensation Arrangements.
Which of the following statements about Rangen's conduct is CORRECT? Rangen's conduct:
A)
meets the requirements of the Code and Standards because his firm's research department recommended the U.S. Treasury strips and non-dividend paying stocks.
B)
does not meet the requirements of the Code and Standards because his investment strategy is inconsistent with his clients' objectives.
C)
meets the requirements of the Code and Standards because his clients are aware of the risks that he is taking in managing their accounts.


Rangen's actions are inconsistent with Standard III(C), Suitability, because his investment actions are neither appropriate nor suitable for each client. Even if his clients were aware of the risks, the portfolios that he constructed are inconsistent with their financial needs. Because he is in a position to control the volume and frequency of transactions in their accounts, he has control over the accounts. Although Rangen relies upon recommendations from his firm’s research department, he cannot shift blame to his employer because he must follow recommendations that are in the best interests of his clients.
作者: prashantsahni    时间: 2012-3-20 10:22

The O’Douls (husband and wife) have decided to work with Jane Mack, CFA, to have her recommend an investment portfolio for them. The O’Douls are novice investors and Mack has determined their asset allocation model falls into the conservative category. After researching various investment options for the O’Douls, Mack has made a recommendation that they divide their account on a 25%/75% basis between shares of a computer peripherals manufacturing company her brokerage firm is underwriting and investment grade corporate bonds. The O’Douls are not aware that Mack’s firm is underwriting an offering of the company in question. Which CFA Institute Standard(s) has Mack violated given her actions?
A)
Standard V(A), Diligence and Reasonable Basis, and I(D), Misconduct.
B)
Standard III(B), Fair Dealing, and III(A), Loyalty, Prudence, and Care.
C)
Standard VI(A), Disclosure of Conflicts, and III(C), Suitability.


Mack is obliged to disclose the conflict of interest regarding her company’s IPO and to consider both the appropriateness and the suitability of the investment for her client. She has apparently failed in both respects.
作者: prashantsahni    时间: 2012-3-20 10:23

Carol Hull, CFA, is an investment advisor whose prospective client, Frank Peters, presents special requirements. To construct an investment policy statement for Peters, Hull inquires about Peters’ investment experience, risk and return objectives, and financial constraints. Peters states that he has a great deal of investment experience in the capital markets and does not wish to answer questions about his tolerance for risk or his other holdings. Under Standard III(C), Suitability, Hull:
A)
is permitted to manage Peters’ account without any knowledge of his risk preferences.
B)
may accept Peters’ account but may only manage his portfolio to a benchmark or index.
C)
must decline to enter into an advisory relationship with Peters.


Hull would not violate Standard III(C), Suitability, by managing Peters’ account without knowledge of his risk preferences. She made a reasonable inquiry into Peters’ investment experience, risk and return objectives, and financial constraints, as the Standard requires. If a client chooses not to provide some of this information, the member or candidate can only be responsible for assessing the suitability of investments based on the information the client does provide.
作者: prashantsahni    时间: 2012-3-20 10:23

Karen Jackson is a portfolio manager for Super Selection.  Jackson is friendly with David James, president of AMD, a rapidly growing biotech company. James has provided Jackson with recommendations in the biotech industry, which she buys for her own portfolio before buying them for her clients. For three years, Jackson has also served on AMD's board of directors. She has received options and fees as compensation.
Recently, the board of AMD decided to raise capital by voting to issue shares to the public. This was attractive to board members (including Jackson) who wanted to exercise their stock options and sell their shares to get cash. When the demand for initial public offerings (IPO) diminished, just before AMD's public offering, James asked Jackson to commit to a large purchase of the offering for her portfolios. Jackson had previously determined that AMD was a questionable investment but agreed to reconsider at James' request. Her reevaluation confirmed the stock to be overpriced, but she nevertheless decided to purchase AMD for her clients' portfolios.
Did Jackson violate Standard III(C) concerning Portfolio Recommendations and Actions?
A)
Yes, she did not deal fairly with all clients.
B)
No.
C)
Yes, she did not consider the appropriateness and suitability of investment recommendations or actions for each portfolio or client.


Jackson violated Standard III(C) because she did not consider her clients' financial situation, investment experience, and investment objectives. If the stock is questionable and overpriced, it is not suitable for any of her clients.
作者: prashantsahni    时间: 2012-3-20 10:23

According to CFA Institute Standards of Professional Conduct, when a client asks her portfolio manager to change the current investment strategy of the client’s portfolio, the manager should:
A)
examine whether the strategy is appropriate for the client and explain the implications of the new strategy before implementing the strategy.
B)
explain the implications of the new strategy after the member manager implements the strategy.
C)
obey the client's request without question.


According to Standard III(C), Suitability, the member manager must determine that an investment is suitable given the client’s objectives/constraints and within the context of the client’s total portfolio. In this case, the member manager must examine the new strategy to see if it is appropriate for the client, even if the client asked for the change. The member should also explain the implications of the strategy to avoid any misrepresentations that may result from omitting details.



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