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标题: Ethical and Professional Standards 【Reading 2】 [打印本页]
作者: Mechanic    时间: 2012-3-20 14:41     标题: [2012 L3] Ethical and Professional Standards 【Session 1 - Reading 2】

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)
have all trades reviewed by his compliance department until he has obtained an expert level of knowledge in compliance.
B)
update his understanding of applicable laws and regulatory standards relating to his position.
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: Mechanic    时间: 2012-3-20 14:42

A government committee has concluded that investment company fees should be disclosed to clients each quarter and has proposed new legislation to require this. Currently, the legal requirement is to report such data annually. In compliance with current legal requirements, Dolphin Investments discloses its fees annually. Eugene Shin, CFA, Dolphin's compliance officer, learns of the proposed changes but does not convert Dolphin's reporting to a quarterly basis. Shin's decision not to act:
A)
constitutes professional misconduct as defined in the Code and Standards.
B)
is not a violation of the Code and Standards.
C)
is a violation of his duty to employer as defined in the Code and Standards.


The potential change in the law is only a proposal at this stage. There is no violation as long as Dolphin is following the regulations currently in force.
作者: Mechanic    时间: 2012-3-20 14:42

Georgia Jones, CFA, is an analyst for Johnson, Thomas & Co. She also serves as an outside director for Dewey Manufacturing, Inc. In the course of her duties, she begins to believe that Dewey’s income statement for the most recent period may have been misstated. Georgia should do all of the following EXCEPT:
A)
consult with Dewey Manufacturing's legal counsel.
B)
inform the Securities and Exchange Commission.
C)
consult with Johnson, Thomas' legal counsel.


Jones must pursue her concerns about a possible misstatement, because, if material, it may be misleading to investors. Consistent with Standard I(A), Jones must not knowingly participate or assist in a regulatory violation. As long as her concerns exist, she must not validate any financial statements by voting to approve them. In addition she should seek competent legal counsel both at her own firm and at Dewey Manufacturing. She should not go to regulatory bodies until she has more certainty about the possible misstatement and has received counsel that she should proceed.
作者: Mechanic    时间: 2012-3-20 14:43

A member 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 the appropriate regulatory agency.
C)
report the illegal activity to CFA Institute Professional Conduct Program for action.


Standard I(A), Knowledge of the Law, applies in this situation. According to this Standard, members shall not knowingly participate or assist in, and must dissociate from, any violation of laws, rules, or regulations.
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: Mechanic    时间: 2012-3-20 14:43

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: Mechanic    时间: 2012-3-20 14:43

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, and the member should disassociate from these colleagues.
B)
Yes, because the member is bound by the Code of Ethics.
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: Mechanic    时间: 2012-3-20 14:44

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: Mechanic    时间: 2012-3-20 14:45

Lawrence Kelly is the Chief Investment Officer at a money management company that claims it is in compliance with CFA Institute Soft Dollar Standards. For the first time, the company has purchased securities in the country of Santa Rosa. He learns that under Santa Rosen law, one of the company's soft dollar policies is forbidden, yet to conform with the law, Lawrence would have to violate the Soft Dollar Standards, but not the Standards of Professional Conduct. Lawrence:
A)
must follow the Santa Rosen Law and cease claiming compliance with CFA Institute Soft Dollar Standards.
B)
should follow the Santa Rosen Law and can still claim compliance with CFA Institute Soft Dollar Standards.
C)
must follow the CFA Institute Soft Dollar Standards, informing the Santa Rosen regulators of his reasons.


In cases when the Soft Dollar Standards conflict with local law, managers should follow local law and are still in compliance with the Standards.
作者: Mechanic    时间: 2012-3-20 14:45

Which of the following statements about the CFA Institute Code and Standards is most accurate? The Code and Standards:
A)
require members to persuade the perpetrator to cease illegal activities.
B)
prohibit members from accepting gifts that create a conflict with their employer's interest.
C)
do not require that members report legal violations to the appropriate governmental or regulatory organization.


The Code and Standards do not require members to report violations to legal authorities, but such disclosure may be prudent or required in certain circumstances. They do not require members to quit their jobs or to persuade violators to cease illegal activities. They do require that members report the activities to the appropriate person(s) in their own firm and disassociate themselves from the illegal actions. Members must obtain written permission to accept gifts that create a conflict with their employer's interest.
作者: Mechanic    时间: 2012-3-20 14:46

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)
Report the employee violating the law to the appropriate governmental authority.
B)
Seek legal advice.
C)
Report the employee violating the law to the appropriate supervisor in the firm.


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: Mechanic    时间: 2012-3-20 14:46

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 the SEC if he knows a law has been violated.
B)
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.
C)
the firm's counsel if he feels a law has been violated and contact his supervisor 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: Mechanic    时间: 2012-3-20 14:46

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)
not permitted to accept either gift.
C)
permitted to accept the vase but not the statue.


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: Mechanic    时间: 2012-3-20 14:47

Mary Kim practices in the economically advanced country of Oldasia as well as in the emerging market 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. According to the CFA Institute Standards of Professional Conduct, Kim may:
A)
not trade ahead of her clients in either country.
B)
trade ahead of her clients in Newasia only.
C)
trade simultaneously with 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) Knowledge of the Law must apply the CFA Institute Code and Standards or the controlling law, whichever is stricter. Because Standard VI(B) Priority of Transactions requires members to put client trades ahead of their own transactions, Kim must follow the standard in the absence of governing law or where the law is less strict than the Standard.
作者: Mechanic    时间: 2012-3-20 14:47

John Martin, an analyst, discovers that Jurix Co. has knowingly misstated information in its prospectus. To comply with CFA Institute’s Code of Ethics and Standards of Professional Conduct, Martin's most appropriate course of action is to:
A)
report the finding to the appropriate supervisory person in his firm.
B)
call the appropriate regulatory agency and report the action.
C)
resign from his job in order to disassociate from the potentially illegal activity.


To comply with the Code and Standards, John should notify the appropriate supervisory person in his firm of the violation.
作者: Mechanic    时间: 2012-3-20 14:47

Which of the following is a CORRECT statement of a member's duty under the Code and Standards?
A)
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.
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)
In the absence of specific applicable law or other regulatory requirements, the Code and Standards govern the member's actions.


Members are always, at a minimum, subject to the Code and Standards.
作者: Mechanic    时间: 2012-3-20 14:48

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)
transferring supervision of the intern to another person.
B)
telling her intern to stop such conduct.
C)
reporting the activity to the appropriate authorities.

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: Mechanic    时间: 2012-3-20 14:48

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 promptly disassociate himself from Atlantic's actions by resigning as a director or by reporting the activities to the appropriate authorities.
C)
Smith should wait until the next board meeting, which is scheduled in two weeks, to make other board members aware of the situation.


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: Mechanic    时间: 2012-3-20 14:48

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 disclose in writing to the proper regulatory authority all observed violations of the securities laws and regulations.
C)
to inform employer, clients, and potential clients of benefits received for recommending products or services.


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: Mechanic    时间: 2012-3-20 14:49

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)
Recommend notifying their employer of their responsibility to follow the Code and Standards.
C)
Deliver a copy of the Code and Standards to their employer.


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: Mechanic    时间: 2012-3-20 14:49

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


There is no reason to have employees write personal ethics statements. CFA Institute encourages all of the other actions.
作者: Mechanic    时间: 2012-3-20 14:49

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: Mechanic    时间: 2012-3-20 14:49

CFA Institute believes:
A)
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.
B)
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.
C)
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.


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: Mechanic    时间: 2012-3-20 14:50

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)
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.
B)
disassociate from any illegal or unethical activity if the member has reasonable grounds to believe that the activity is illegal or unethical.
C)
consult counsel to determine the legality of the activity.


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: Mechanic    时间: 2012-3-20 14:50

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)
determine the legality of the activity, possibly by consulting counsel.
B)
take no action.
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: Mechanic    时间: 2012-3-20 14:50

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)
not use material inside information.
B)
use material inside information because Xania legally permits this practice.
C)
use material inside information, but only after notifying CFA Institute.


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: Mechanic    时间: 2012-3-20 14:51

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)
both of these choices are correct.
B)
disassociate herself from the activity.
C)
seek legal advice to determine what actions should be taken.


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: Mechanic    时间: 2012-3-20 14:51

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)
did not violate either Standard I(A) or Standard I(C).
B)
violated both Standard I(A) and 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: Mechanic    时间: 2012-3-20 14:51

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: Mechanic    时间: 2012-3-20 14:52

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: Mechanic    时间: 2012-3-20 14:52

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: dkishore1    时间: 2012-3-20 14:54

An analyst, who is a CFA charterholder, is working in a foreign country. Which of the following statements is CORRECT? The analyst is:
A)
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.
B)
governed by the laws and standards of the country in which he is living and working.
C)
governed by 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: dkishore1    时间: 2012-3-20 14:54

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: dkishore1    时间: 2012-3-20 14:54

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: dkishore1    时间: 2012-3-20 14:54

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)
an overreaction. Senior management's sanctioning of the act absolves McDowell from his ordinary responsibility as a CFA Institute member.
B)
a suitable reaction, and he is in compliance with the Code and Standards.
C)
a violation of the Code and Standards since he is required not to knowingly participate or assist in such an act.


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: dkishore1    时间: 2012-3-20 14:55

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)
No, because a fight at a rugby game is not a professional activity.
B)
Yes, because the member is bound by the Code of Ethics.
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: dkishore1    时间: 2012-3-20 14:55

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: dkishore1    时间: 2012-3-20 14:55

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 but the law in Country B and Country C.
C)
Country A and Country B but the law in 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: dkishore1    时间: 2012-3-20 14:56

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)
did not violate either Standard I or Standard IV(A).
C)
violated Standard I but did not violate 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: dkishore1    时间: 2012-3-20 14:56

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: dkishore1    时间: 2012-3-20 14:56

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)
Keep informed about changes in applicable laws, rules, and regulations.
C)
Rely on past practices followed within his firm.


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: dkishore1    时间: 2012-3-20 14:57

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: dkishore1    时间: 2012-3-20 14:57

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)
not take investment action on the basis of this information.
B)
take investment action based on this information for clients in both Country N and Country L and for himself.
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: dkishore1    时间: 2012-3-20 14:57

An analyst has been writing research reports on a company for many years. As part of the analyst’s continuing research efforts, the analyst allows the firm to fly him to the firm’s headquarters and put him up in the guest quarters the company has for all corporate visitors. According to Standard I(B), Independence and Objectivity, this is:
A)
a violation no matter what the circumstances.
B)
a violation if the headquarters are within reasonable driving distance from the analyst's home.
C)
not a violation under any circumstances.


If such a trip is “out-of-the-way,” payment by the company for the trip is acceptable. If the headquarters are within reasonable driving distance, the analyst should drive there.
作者: dkishore1    时间: 2012-3-20 14:57

According to CFA Institute Standards of Professional Conduct, which of the following is least likely a compliance procedure for maintaining independence and objectivity in making investment recommendations or taking investment action?
A)
Create a restricted list so that the firm disseminates only factual information about a controversial company.
B)
Restrict special cost arrangements related to travel.
C)
Maintain files to support investment recommendations.


Maintaining files to support investment recommendations is not a compliance procedure for Standard I(B): Independence and Objectivity, but it is a compliance procedure for Standard V(C): Record Retention.
作者: dkishore1    时间: 2012-3-20 14:58

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)
congruent with Standard V(A), Diligence and Reasonable Basis.
B)
in violation of Standard V(A), Diligence and Reasonable Basis.
C)
in violation of Standard I(B), Independence and Objectivity.


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: dkishore1    时间: 2012-3-20 14:58

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: dkishore1    时间: 2012-3-20 14:59

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: dkishore1    时间: 2012-3-20 14:59

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)
may attend, but he must disclose the arrangement to TrustCo's clients and prospects as required under Standard IV.B.
B)
may attend, but he must disclose the arrangement to his employer as a gift.
C)
should not attend unless he pays for the trip himself.


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: dkishore1    时间: 2012-3-20 14:59

Tony Calaveccio, CFA, is the manager of the TrustCo Small Cap Venture Fund in Toronto. He places trades for the fund with River City Brokerage. River City presents Calaveccio with a bottle of inexpensive wine at Christmas each year. Calaveccio does not disclose this fact in the prospectus of the small cap venture fund. This action is:
A)
in violation of the Standard concerning disclosure of additional compensation arrangements.
B)
not in violation of the Code and Standards.
C)
in violation of the Standard concerning disclosure of conflicts to clients and prospects.


Under Standard I(B) Independence and Objectivity, members are advised to "use reasonable care" in order to maintain independence. While it is clearly understood that gifts from various entities have the potential to affect a member's independence and objectivity, a member can accept token gifts as long as they are not intended to influence or reward.
作者: dkishore1    时间: 2012-3-20 14:59

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


Nielsen is not in violation of Standard I(B) "Independence and Objectivity" because commercial travel is effectively unavailable.
作者: ShooterMcCFA    时间: 2012-3-20 15:01

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)
decline to attend the event as it could result in a violation of Standard I(B) "Independence and Objectivity."
B)
accept the invitation as no cash compensation is involved and the primary intent is to educate and inform the investment community.
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: ShooterMcCFA    时间: 2012-3-20 15:02

The following information involves two research analysts at a brokerage firm.
According to CFA Institute Standards of Professional Conduct involving prohibition against plagiarism, which of the following statements is CORRECT?
A)
Wain violated the Standards, but Bagenot did not.
B)
Both Bagenot and Wain violated the Standards.
C)
Bagenot violated the Standards, but Wain did not.


Bagenot complied with Standard I(C), which permits publishing factual information from Standard & Poor's without acknowledgment and using excerpts with acknowledgment. Wain committed plagiarism because she failed to give specific references for the quotations that she used.
作者: ShooterMcCFA    时间: 2012-3-20 15:02

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: ShooterMcCFA    时间: 2012-3-20 15:02

At the time of its initial public offering (IPO), a mutual fund is invested primarily in junk bonds. As part of its strategy, it is also invested in some zero-coupon U.S. Treasury bonds. The amount of the investment in the Treasury bonds is such that their maturity value equals 90% of the current value of the fund. Which of the following may a CFA Institute member say to her clients concerning the fund at issuance?
A)
A CFA Institute member may not make either of these statements.
B)
Since the fund is backed by the U.S. government, you know you will get your money back.
C)
The fund is virtually default risk free.


Standard I(C), Misrepresentation, prohibits making statements that mention a guarantee of returns or misrepresent the true nature of the investment.
作者: ShooterMcCFA    时间: 2012-3-20 15:02

All of the following violate Standard I(C), Misrepresentation, EXCEPT:
A)
copying a proprietary computerized spreadsheet without seeking authorization from the creators.
B)
presenting factual information published by recognized statistical reporting services without acknowledgment.
C)
citing quotes attributable to "investment experts" without specific references.


Standard I(C), Misrepresentation, permits using recognized sources of factual information such as Standard & Poor’s Corporation and Moody’s Investors Service without acknowledgment.
作者: ShooterMcCFA    时间: 2012-3-20 15:03

Wes Smith, CFA, has been working toward the completion of a Master of Science in Finance. He has passed all the necessary courses and written the necessary thesis. He still must defend the thesis in one month. Smith’s thesis advisor assures him that he will pass the thesis defense. Smith has new business cards printed with “M.S. in Finance” after his name. This is a violation of:
A)
Standard VII(B), Reference to CFA Institute, the CFA Designation, and the CFA Program.
B)
Standard I(C), Misrepresentation.
C)
none of the Standards if Smith does not make the cards public until after he defends his thesis and receives his degree.


If the cards were distributed today he would be in violation of Standard I(C), Misrepresentation. However, if Smith does not make the cards public until after he receives the degree, there is no violation.
作者: ShooterMcCFA    时间: 2012-3-20 15:03

According to CFA Institute Standards of Professional Conduct, which of the following is NOT a form of plagiarism?
A)
Citing specific quotations supposedly attributable to "leading analysts" and "investment experts" without specific reference.
B)
Presenting statistical estimates of forecasts prepared by others with the source identified, but without qualifying statements or caveats that may have been used.
C)
Using factual information published by recognized financial and statistical reporting services or similar sources without an acknowledgment.


Standard I(C) provides that "factual information published by recognized financial and statistical reporting services or similar sources" may be used without an acknowledgment.
作者: ShooterMcCFA    时间: 2012-3-20 15:04

A copyrighted technique for measuring the downside risk of an investment has just been revealed to the public. If an analyst adopts the technique, he must cite the use of the technique in all research reports in which the technique is used EXCEPT:
A)
if the analyst does not modify the technique at all.
B)
if the analyst uses reasonable care and verifies that the technique provides superior results.
C)
Neither of these answers provide grounds for an exception.


Neither of the answers in this question provide adequate grounds for not citing the source of the methodology. Although “verifying” the technique is a good idea and congruent with the Code and Standards, the analyst still needs to cite the use of the copyrighted technique even after modifying it slightly to avoid violation of Standard I(C), Misrepresentation.
作者: ShooterMcCFA    时间: 2012-3-20 15:04

According to CFA Institute Standards of Professional Conduct, which of the following statements about the prohibition against plagiarism is most correct? The prohibition against plagiarism applies to written materials:
A)
oral communications, and telecommunications.
B)
only.
C)
and oral communications only.


The prohibition against plagiarism applies to all three areas.
作者: ShooterMcCFA    时间: 2012-3-20 15:04

An analyst preparing a report needs to cite which of the following?
A)
Estimates of betas provided by Standard & Poor's.
B)
A recent quote from the Federal Reserve Chairman.
C)
The individual who developed a chart from the same firm.


Statistics provided by a recognized agency, such as Standard and Poor’s, do not need to be cited. Charts, quotes, and algorithms developed by the firm would need to be cited when they are used but the individual(s) who developed the materials within the firm do not need to be cited.
作者: ShooterMcCFA    时间: 2012-3-20 15:05

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: ShooterMcCFA    时间: 2012-3-20 15:05

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 fiduciary duties owed to clients under the Standards.
B)
not in violation of the Code and Standards.
C)
a violation of the Standard concerning prohibition against misrepresentation.


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: ShooterMcCFA    时间: 2012-3-20 15:05

Sandra Bulow, CFA, is responsible for updating her employing firm’s website to include changes in analysis techniques and trading procedures. She is often very delinquent in making these changes, despite working extensive hours. She is aware clients are using the website to make investment decisions, and has received complaints from the sales department as the information on the website if often different from what is presented in sales meetings. Bulow is most likely:
A)
in violation of Standard I(C) "Misrepresentation."
B)
in violation of Standard III(B) "Fair Dealing."
C)
not in violation of any Standard.


Bulow is most likely in violation of Standard I(C) "Misrepresentation." The web site information is erroneous, and needs to be updated to match the firm’s current practices.
作者: ShooterMcCFA    时间: 2012-3-20 15:06

NQX Partners is a Los Angeles-based investment firm specializing in the equities of natural resources companies, both as an underwriter of secondary issues and as a market-maker. Paula Braman, CFA, an analyst at NQX, is putting together a research report on Melbourne Gold, an Australian firm. She is in possession of a report distributed by a little-known Brisbane brokerage firm, Ipswich, which has several CFA charter holders on the staff. Braman also uses market data available from the financial press and recognized statistical sources. In her report, she uses several unaltered paragraphs and data tables from the Ipswich report as well as financial data from the other sources. For neither of these does she provide acknowledgement of the original source.
Braman attended a lunch-time presentation put on by Melbourne Gold (MG) for representatives of NQX and other firms. During the meeting, Braman agrees to accept a trip to Australia to visit MG’s operations as well as spend several days touring Australia at MG’s expense. Braman had a few drinks at the lunch-time presentation. On the way back to the office, she was arrested for driving while intoxicated (DWI), and this is her second offense.
Braman recently hired a personal assistant who will be partly paid by her and partly paid by NQX. The assistant had passed the level one CFA exam prior to being hired. Knowing that Braman had the CFA designation, during the application process the assistant mentioned having passed the exam both on his resume and in the interview.
For the past 10 years, Braman has served as a proctor for the CFA exam. Braman tells her assistant that she normally receives the examinations on the Thursday before the exam. Given the low pass rate at Level II, Braman asks her assistant if she would like an advance copy of the next exam. Braman’s assistant declines the offer. However, Braman’s assistant has been very vocal about expressing opinions about the low pass rate. The assistant claims, “CFA Institute is simply trying to increase its cash flow by continuing to fail candidates.”
Initially, Braman only had the assistant type up routine forms, stuff envelopes, screen calls, and schedule meetings. The assistant did nothing related to analysis or decision making. Braman has been pleased with the work of the assistant and often tells associates that she “has a level one CFA as an assistant.” Recently, Braman has allowed the assistant to write portions of preliminary reports, which Braman reviews before incorporating them into the final reports.
With respect to the use of information in the report on MG, Braman was:
A)
in violation of the Standards in the use of all the sources of data.
B)
not in violation of the Standards.
C)
in violation of the Standards in the use of the Ipswich report but not the data from the other sources.


Braman has violated Standard I(C), Misrepresentation, by including unaltered material from the Ipswich research report without acknowledgement of its original report. The use of the financial data from the financial press and recognized statistical sources without acknowledgement is permissible. (Study Session 1, LOS 2.a,b)
With respect to Braman’s drinking and being arrested for a DWI, Braman was:
A)
in violation of the Standards with respect to both the drinking and the DWI arrest.
B)
in violation of the Standards with respect to the DWI arrest but not the drinking itself.
C)
not in violation of the Standards.


Braman's drinking is in violation of Standard I(D): Misconduct which states that “Members… must not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence.” Being charged with DWI during working hours is a violation of the Standards because this indicates according to the law that Braman was intoxicated which could impair her ability to perform her duties at work. (Study Session 1, LOS 2.a,b)
If Braman accepts the trip to Australia as offered by MG, based on the given information, she is:
A)
not in violation of the Standards and the value of the trip is not important.
B)
in violation of the Standards.
C)
not in violation of the Standards if the trip’s value is not in excess of $1,000.


The trip to MG’s operations is questionable, but the extra days touring Australia clearly make accepting the trip a violation of Standard I(B): Independence and Objectivity. The extra perks of the trip could impair Braman’s judgment. Note that in this case, the dollar amount of the perks is not relevant. (Study Session 1, LOS 2.a,b)
There was a misuse of the CFA designation by:
A)
neither Braman nor the assistant.
B)
Braman but not the assistant.
C)
neither Braman nor the assistant.


The assistant was within his right to mention that he had passed the level one exam in the interview and on his resume. It is a statement of fact. Without any more information, we cannot say the assistant misused the CFA designation. Braman should not have said she “has a level one CFA as an assistant”. This is a violation of Standard VII(B), Reference to CFA Institute, the CFA Designation, and the CFA Program. (Study Session 1, LOS 2.a,b)
With respect to Standard VII(A), Conduct as Members and Candidates in the CFA Program:
A)
Neither Braman nor her assistant are in violation of the standard.
B)
Both Braman and her assistant are in violation of the standard.
C)
Braman is in violation of the standard but her assistant is not in violation.


According to Standard VII(A), Members and Candidates must not compromise the integrity of the CFA exam. Braman’s offer to supply an advance copy of the exam is an obvious violation. However, the standard does not prohibit expressing opinions about the CFA Institute; thus, Braman’s assistant is not in violation with his comments. (Study Session 1, LOS 2.a,b)
Braman tells her assistant that she is writing a more favorable report on MG than is warranted to secure a big bond underwriting deal with MG in the near future. She is doing this at the order of the senior management of NQX. Braman gives the assistant her report on MG to type up for dissemination. The assistant types the report and helps in its dissemination. With respect to this:
A)
Braman is in violation of the Code and Standards, but the assistant is not.
B)
neither the assistant nor Braman are in violation of the Code and Standards.
C)
both the assistant and Braman are in violation of the Code and Standards.


Braman is in violation of Standard I(B) on Independence and Objectivity by composing a biased report. The assistant has been told the report is biased and violates Standard I(A) by knowingly participating and assisting in a violation of the Standards. (Study Session 1, LOS 2.a,b)
作者: ShooterMcCFA    时间: 2012-3-20 15:07

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)
complied with Standard I(D) concerning professional misconduct.
B)
violated the Code of Ethics by invading the applicants' privacy.
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: ShooterMcCFA    时间: 2012-3-20 15:07

A CFA charterholder who comes to work intoxicated is:
A)
in violation of Standard IV(A) concerning duties to employer.
B)
in violation of Standard I(D) concerning professional misconduct.
C)
not in violation of the standards.


Being intoxicated at work is poor personal behavior. It is a violation of Standard I(D), which covers professional competence and integrity.
作者: ShooterMcCFA    时间: 2012-3-20 15:07

A CFA charterholder is caught shoplifting and is sentenced to nine months in prison. Is this a violation of Standard I(D) Misconduct?
A)
Yes, because the prison sentence is more than six months.
B)
Yes, because the crime involved stealing.
C)
No, because the crime does not relate to the investment profession.


Any act involving lying, cheating, stealing, or other dishonest conduct that reflects adversely on the charterholder’s professional activities is a violation of Standard I(D). Although the crime did not relate to the investment profession, it certainly reflected adversely on the charterholder professionally.
作者: ShooterMcCFA    时间: 2012-3-20 15:08

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


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: ShooterMcCFA    时间: 2012-3-20 15:08

An analyst belongs to a nationally recognized charitable organization, which requires dues for membership. The analyst has worked out a deal under which he provides money management advice in lieu of paying dues. While performing services for the organization, the analyst discovers some useful computer programs that his predecessor developed and left as the property of the organization. The analyst decides to use the computer programs in his consulting business. This action is:
A)
appropriate since the analyst is technically an employee of the organization.
B)
a violation of Standard I(D) concerning misconduct.
C)
a violation of Standard III(B) concerning fair dealing.


Since the programs are the property of the organization, the analyst can only use them for the organization. It does not matter whether the analyst is an employee or not. Personal use of the programs without permission from the charitable organization is dishonest and prohibited.
作者: ShooterMcCFA    时间: 2012-3-20 15:08

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)
No, if such a crime carries less than a one-year prison term.
B)
Yes, because it reflects adversely on the charterholder’s professional reputation.
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: cyber21    时间: 2012-3-20 15:09

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 engaged in professional misconduct.
C)
Hall did not engage in professional misconduct because she did not meet all of the requirements to use the CFA designation.


Hall engaged in professional misconduct because her act involved dishonesty, fraud, and deceit.
作者: cyber21    时间: 2012-3-20 15:10

Which of the following does NOT violate Standard I(D), Misconduct? Roland Lawson, a financial analyst:
A)
committed perjury in connection with a lawsuit against his firm.
B)
is arrested for participating in a nonviolent protest.
C)
drinks excessively during business meetings with clients and returns to work under the influence of alcohol.


Any professional conduct that involves dishonesty, fraud, or deceit is a violation of Standard I(D), Misconduct. One must refrain from activities that reflect poorly on integrity, reputation, trustworthiness, or professional conduct. The focus of the Standard is on professional, not personal, conduct.
作者: cyber21    时间: 2012-3-20 15:10

Timothy Hooper, CFA, is a security analyst at an investment firm. In his spare time, Hooper serves as a volunteer for City Pride, which collects clothes for the homeless. Hooper has occasionally given some of the clothes to his friends or sold the clothes instead of returning all of the clothing to City Pride. City Pride discovers what he has been doing and dismisses him. Later, City Pride learns that other volunteer organizations have dismissed Hooper for similar actions. Has Hooper violated Standard I(D) on professional misconduct in the CFA Institute Standards of Professional Conduct?
A)
Yes.
B)
No, because Hooper's conduct is unrelated to his professional activities as a security analyst.
C)
No, because Hooper volunteers his services to City Pride.


Hooper violated Standard I(D) because he repeatedly engaged in conduct that involves dishonest conduct. This violation occurred despite the fact that his offenses do not relate directly to his professional activities. However, Hooper’s conduct reflects poorly on his professional reputation and integrity.
作者: cyber21    时间: 2012-3-20 15:10

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)
a violation of Standard II(A) "Material Non-Public Information."
B)
not a violation of Standard II(A) "Material Non-Public Information."
C)
only a violation of Standard II(A) "Material Non-Public Information" because Front is simultaneously shorting the funds which do not contain VTT Bowser.


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: cyber21    时间: 2012-3-20 15:11

An analyst provides services for a charitable organization and in return gets free membership in the organization. Part of her job is to manage the liquid assets of the organization, and those assets include stocks. Her supervisor in the organization calls her and tells her to buy a certain stock for the portfolio based upon insider information from a board member in the organization. The analyst objects, but the supervisor says this is what they have always done and sees no reason for changing now. The analyst complies with the request. With respect to Standards IV(A), Loyalty to Employer, and II(A), Material Nonpublic Information, the analyst violated:
A)
only Standard II(A) that prohibits insider trading.
B)
both Standards IV(A) and II(A).
C)
only Standard IV(A) requiring duty of loyalty.


An employee/employer relationship does not necessarily mean monetary compensation for services. Complying with the request is a violation of II(A) which prohibits trading on insider information.  Standard IV(A) Loyalty deals with going into business for yourself, leaving an employer and continuing to act in the employer's best interest until their resignation becomes effective, and whistleblowing which means that the member's interests and their firm's interests are secondary to protecting the integrity of capital markets and the interests of the clients.
作者: cyber21    时间: 2012-3-20 15:11

A stockbroker who is a CFA Institute member is called on the telephone by the CEO of a large company. The CEO asks to buy shares of the CEO’s company for the accounts of the CEO’s children. In the course of the conversation, the CEO says this will really pay off when the upcoming takeover goes through. The stockbroker checks her sources and finds no information about the takeover. In this case the broker should:
A)
only execute the order in compliance with Standard III(A), Loyalty, Prudence, and Care. Since the client is buying the stock for the children, there is not a problem.
B)
do neither of the actions listed here.
C)
execute the order for all clients as required by Standard III(B), Fair Dealing.


Doing any of these actions would be a violation of Standard II(A), Material Nonpublic Information. Members and Candidates must not act or induce others to act on material nonpublic information.
作者: cyber21    时间: 2012-3-20 15:12

A stockbroker who is a member of CFA Institute has a part-time housekeeper who also works for the CEO of Festival, Inc. One day the housekeeper mentions to the broker that she saw the CEO of Festival having a conversation at his home with John Tater, who is a nationally known corporate lawyer and consultant. The stockbroker is restricted from trading on this information:
A)
for both of the reasons listed here.
B)
if the housekeeper says the meeting concerned a tender offer and the broker knows that it is non-public information.
C)
only if the broker knows that the meeting is non-public information.


Standard II(A), Material Nonpublic Information, states “a member cannot trade or cause others to trade in a security while the member possesses material nonpublic information” A tender offer would certainly be material nonpublic information. Knowing that the meeting took place, and nothing else, does not restrict the broker. A reasonable investor would need to know more to determine if the information was material.
作者: cyber21    时间: 2012-3-20 15:12

A CFA Institute member is a U.S. citizen living and working in a foreign country. That country has no laws against insider trading. Based on this information, the CFA Institute member may:
A)
trade using insider information.
B)
not trade using insider information based upon the rules of the SEC.
C)
not trade using insider information based upon the CFA Institute Standards.


CFA Institute Standard II(A) prohibits trading using insider information. A member may not trade using such information regardless of the rules of the country where he/she lives.
作者: cyber21    时间: 2012-3-20 15:12

Andrea Waters is an investment analyst who has accumulated and analyzed several pieces of nonpublic information through her contacts with drug firms. Although no one piece of the information she collected is "material," Waters correctly concluded that the earnings of one of the drug companies would be unexpectedly high in the coming year. According to CFA Institute Standards of Professional Conduct, Waters:
A)
can use the information to make investment recommendations and decisions.
B)
cannot legally invest or make recommendations based on this information.
C)
may use the information, but only after approval from a compliance officer or supervisor.


Members who can piece together items of nonmaterial nonpublic information with public information can, based upon the mosaic theory, use such information for trading purposes.
作者: cyber21    时间: 2012-3-20 15:13

Which one of the following constitutes the illegal use of material nonpublic information?
A)
Trading based on your analytical review of the firm's future prospects.
B)
Trading immediately after attending the firm's annual shareholders’ meeting.
C)
Trading on information your sister, the firm's attorney, told you over dinner.


Members may not trade on material nonpublic information; therefore, the information conveyed by the firm’s attorney may not be used by a member for trading purposes.
作者: cyber21    时间: 2012-3-20 15:13

Regarding non-public information, which one of the following statements is NOT correct?
A)
An analyst may use some types of non-public information.
B)
Disclosing material non-public information would have an impact on the price of a security or be of interest to a reasonable investor.
C)
A member can be summarily suspended for having received material non-public information.


All of these are true except that a member can be suspended for having received material non-public information. The member can receive such information as part of their regular duties or by accident. Neither is punishable in and of itself, and penalties only apply if the member trades or causes others to trade on the information. The member may have certain duties, such as trying to disseminate the information after receiving it. An analyst may use nonmaterial non-public information.
作者: cyber21    时间: 2012-3-20 15:13

Insider trading can be defined as information that is:
A)
material and public.
B)
material and nonpublic.
C)
nonmaterial and nonpublic.


Information is material if it would be important to the investor in their investment making decision. Information is nonpublic if it is not yet available to the public.
作者: cyber21    时间: 2012-3-20 15:13

Which one of the following least accurately describes the CFA Institute Standard about using material nonpublic information?
A)
An analyst may use nonmaterial nonpublic information as long as it has been developed under the Mosaic Theory.
B)
An analyst may violate this Standard by passing information to others even when it has been obtained from outside the company.
C)
An analyst using material nonpublic information may be fined by CFA Institute.


There is no provision for CFA Institute to issue fines to members. Members may not use material nonpublic information for trading purposes. Nonmaterial, nonpublic information may be used together with analysis of public information under the Mosaic Theory.
作者: cyber21    时间: 2012-3-20 15:14

According to CFA Institute Standards of Professional Conduct, which of the following statements about material nonpublic information is NOT correct? Information is:
A)
material if reasonable investors would want to know the information before making an investment decision.
B)
nonpublic until it has been disseminated to a select group of investors.
C)
nonpublic until it has been disseminated to the marketplace in general.


Standard II(A), Material Nonpublic Information, states that information is “nonpublic” until it has been disseminated to the marketplace in general as opposed to a select group of investors.
作者: cyber21    时间: 2012-3-20 15:14

Don Benjamin, CFA, is the compliance officer for a large brokerage firm. He wants to prevent the communication of material nonpublic information and other sensitive information from his firm’s investment banking and corporate finance departments to its sales and research departments. The most common and widespread approach that Benjamin can use to prevent insider trading by employees is the:
A)
fire wall.
B)
Wall Street Rule.
C)
legal list.


To comply with Standard II(A), a fire wall provides an information barrier that prevents communication of material nonpublic information and other sensitive information from one department to another within a firm.
作者: cyber21    时间: 2012-3-20 15:14

A brokerage firm has a trading department and an investment-banking department. Often the investment-banking department receives material non-public information that would be valuable in advising the firm’s brokerage clients. In order to comply with the Standards, the firm:
A)
should record the exchange of information between the investment-banking department and the brokerage department.
B)
must divest one of the departments.
C)
should restrict employee trading in securities for which the firm is in possession of material non-public information.


Restricting employee trading in stocks for which the firm has material non-public information is the best answer. Recording the exchange of information between the two departments is not the best option because there should be no exchange of information between these two departments. Divesting a department is not a suitable method for addressing this potential problem.
作者: cyber21    时间: 2012-3-20 15:15

A CFO who is a CFA Institute member is careful to make his press releases—some of them containing material and previously undisclosed information—clear and understandable to his readers. While writing a new release, he often has his current intern proofread rough drafts. He also sends electronic copies to his brother, an English teacher, to get suggestions concerning style and grammar. With respect to Standard II(A), Material Nonpublic Information, the CFO is:
A)
not in violation of the Standard.
B)
only in violation by e-mailing the pre-release version to his brother but not the intern, because the intern is in essence an employee of the firm.
C)
violating the standard by either showing the pre-release version to his intern or sending it to his brother.


Standard II(A), Material Nonpublic Information, says that a member must be careful about handling material non-public information. As a member of CFA Institute, the CFO must limit the people who see important information before it is released. It would not be appropriate to involve an intern or a relative in the process.
作者: cyber21    时间: 2012-3-20 15:15

Steve Waters, a CFA Level I candidate, has decided to enter into a long position of Farmco stock. Since Farmco is thinly traded, Waters is concerned the order will overwhelm the liquidity of Farmco and the price will surge. Waters engages in a series of block trades in order to accomplish the purchase. According to Standard II(B), Market Manipulation, Waters has engaged in:
A)
neither transaction-based manipulation nor information-based manipulation.
B)
transaction-based manipulation, but not information-based manipulation.
C)
both transaction-based manipulation and information-based manipulation.


Waters is not in violation of Standard II(B), Market Manipulation. Transaction-based manipulation includes, but is not limited to, transactions that artificially distort prices or volume. Information-based manipulation includes, but is not limited to, spreading false rumors about a firm in order to induce others to trade.
作者: cyber21    时间: 2012-3-20 15:16

All of the following are violations of Standard II(B) Market Manipulation EXCEPT:
A)
securing a controlling interest in an equity security in order to influence the price of a related derivative instrument.
B)
disseminating misleading information about the development of new products and technologies.
C)
exploiting differences in market inefficiencies.


Standard II(B) Market Manipulation prohibits practices that distort prices or artificially inflate trading volumes with the intent to mislead market participants. The Standard is not intended to prohibit legitimate trading strategies that exploit differences in market inefficiencies.
作者: cyber21    时间: 2012-3-20 15:16

Mark Williamson is “bearish” on ABC Manufacturing Company. Williamson is so convinced that ABC is overpriced, two weeks ago, he shorted 100,000 shares. Today, Williamson is “surfing” several popular investment bulletin boards on the internet and posting false derogatory comments about company management. According to Standard II(B), Market Manipulation, Williamson has engaged in:
A)
transaction-based manipulation, but not information-based manipulation.
B)
both transaction-based manipulation and information-based manipulation.
C)
information-based manipulation, but not transaction-based manipulation.


Williamson is in violation of Standard II(B), Market Manipulation, by engaging in information-based manipulation. Information-based manipulation includes, but is not limited to, spreading false rumors about a firm in order to induce others to trade.
作者: cyber21    时间: 2012-3-20 15:16

Ron Taylor, a CFA Level I candidate, trades cotton contracts for a small commodity broker. Taylor convinces a government cotton inspector to issue a warning that the Texas cotton crop is in danger from insect infestation. The price of cotton soars. Taylor immediately shorts cotton futures. Once the position is created, the government inspector issues a second report reversing his original opinion and cotton prices plummet.
Cedric Sims, a CFA Level III candidate, would like to generate a tax loss on a security held in his personal portfolio; however, he believes the security has significant upside potential. To avoid the wash sale provisions of the income tax code, Sims sells the security and simultaneously creates a synthetic long position using derivatives.
With regard to Standard II(B) Market Manipulation, which of the following statements concerning Taylor’s and Sims’s conduct is CORRECT?
A)
Neither Taylor nor Sims is in violation of Standard II(B).
B)
Both Taylor and Sims are in violation of Standard II(B).
C)
Taylor is in violation of Standard II(B), but Sims is not in violation.


Taylor is in violation of Standard II(B) Market Manipulation by creating a scheme that caused others to trade on false information. Sims is not in violation of Standard II(B). The Standard does not prohibit transactions conducted for tax purposes.
作者: cyber21    时间: 2012-3-20 15:17

Which of the following is a violation of Standard II(B), Market Manipulation?
A)
Overstating an earnings projection in order to increase the price of a stock.
B)
Implementing a trading strategy to exploit differences in market power and information.
C)
Engaging in a block trade to limit the effect on the price of a thinly traded security.


Standard II(B), Market Manipulation, is not intended to prohibit transactions that are done in order to minimize income taxes or trading strategies that are not intended to distort prices or artificially inflate trading volume. Overstating earnings projections in order to increase the price of a stock is a direct violation.
作者: cyber21    时间: 2012-3-20 15:17

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)
not in violation.
B)
in violation of Standard III(A) "Loyalty, Prudence, and Care" for failing to consider the three securities in the context of the whole portfolio.
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: cyber21    时间: 2012-3-20 15:18

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)
Neither of these.
B)
The personal account privileges.
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: cyber21    时间: 2012-3-20 15:18

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)
uses the resources to help manage the client's account.
B)
does both of the actions listed here.
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: cyber21    时间: 2012-3-20 15:20

Joni Black, CFA, works for a portfolio management firm. Black is a partner of the firm and is primarily responsible for managing several large pension plans. She also is in a supervisory position with several research analysts reporting directly to her. Dave Wood is a research analyst who has worked under Black for the last six years. Wood recently completed the Level III CFA exam and is anxiously awaiting the results. As a display of confidence, Black shows Wood a box of business cards that have already been printed up for Wood with the initials “CFA” after his name. She locks them away in a file cabinet and promises to deliver them on the day they get the news of his passing the exam. Black and Wood have been working closely to service a number of clients. Wood knows that Black recently met with a prospect named John Talbert. Black says that she received Talbert’s paperwork and made a recommendation to Talbert to which he agreed. Black tells Wood to execute the trade. Wood has not seen the final paperwork, but from what he knows, the trade is congruent with Talbert’s situation. Wood also knows the recommendation is generally a sound one.
Black is on the board of directors for ATX Corporation. She was asked to write a research report for ATX Corporation. Because of her relationship with ATX, she assigned Wood to write the report instead. Black is Wood’s supervisor and requires Wood to show all of his work to her for final approval. As Wood begins writing the report, he remembers that the trust fund of his children, left to them by the parents of Wood’s wife, has a sizable investment in ATX. Black manages a pension fund for Evergreen International. The management of Evergreen International has just requested that Black increase the portion in international equity funds to 30 percent of total assets from its current position of 10 percent of total assets. The management of Evergreen International believes the potential for growth in international markets is much greater than the domestic market and would like to see the pension fund managed more aggressively. Wood watches as Black immediately acts upon the recommendation of Evergreen International. Black allocates some of the fund’s assets to a few stocks in foreign countries. One of the stocks immediately goes up in price and volatility, and Black sees an opportunity to earn some extra income by selling a covered call on that particular stock. She sells the call on behalf of the pension fund. Wood asks Black if the pension fund’s charter allows derivative strategies. Black says she does not know, but says she only sells covered calls when she sees a really good opportunity and none of her clients have ever complained even when they have specified that no options shall be used. “Covered calls can never cost a client anything, and they always earn income for the client,” Black points out to Wood.
Despite his close relationship with Black, Wood has been preparing to start his own money management firm. He has turned a spare bedroom in his house into an office with new furniture and computer. He has the room wired with the latest Internet service upgrades. He has subscribed to financial news services and opened a trading account in the name of his proposed company. He has told an old friend about his plans. His friend has a large portfolio being managed at another brokerage firm. The friend had met Black, and told Wood that he did not like her and could not let them handle his portfolio despite their friendship. If Wood was on his own, however, the friend had told Wood that he would want Wood to manage his portfolio. Wood also contacts a cousin, who recently inherited a large portfolio. The cousin says that he would like to get some help managing the portfolio as soon as possible. Wood instructs the cousin to use futures contracts to, in effect, hedge the value of the portfolio cost-free until Wood sets up his business, and Wood can then take his cousin on as a client. He sends each of them a copy of his resume where in his credentials he places after his name “CFA (expected 200X).”With respect to Black’s instruction to execute the trade for Talbert, according to the Standards, Wood should:
A)
execute the trade immediately.
B)
execute the trade only after consulting the firm’s legal counsel.
C)
not execute the trade because he has not met Talbert himself.


Since Black is Wood’s supervisor and has the CFA designation and Wood sees nothing wrong, Wood has no reason to take any intermediate action. (Study Session 1, LOS 2.a,b)
With respect to the report on ATX Corporation that Black asked Wood to write, which of the following must Wood include in the report?
A)
Black is on the board of ATX and the position of ATX in the trust fund of Wood’s children only.
B)
Wood does not have the CFA designation and that Black is on the board of ATX.
C)
Wood does not have the CFA designation and the position of ATX in the trust fund of Wood’s children.


This question is related to Disclosure of Conflicts, Standard VI(A). Black’s relationship with ATX Corporation must be disclosed in the research report because it could impair Black’s ability to make an unbiased judgment. Under the same standard, the position of ATX in the children’s trust fund must be mentioned because it is beneficial ownership that could reasonably impair Wood’s judgment. Even though Wood is the one writing the report, both potential conflicts need to be disclosed since Black is supervising Wood. The fact Black requires Wood to get her approval, which is congruent with Standard IV(C), is simply a routine firm policy that does not need reporting. It is not required to mention that an analyst does not have the CFA designation. (Study Session 1, LOS 2.a,b)
With respect to the pension fund for Evergreen International, Black’s fiduciary duty is:
A)
owed to the participants and beneficiaries of Evergreen International. Therefore, Black should continue to manage the fund in their best interest regardless of the management's request.
B)
to the participants, beneficiaries, and management of Evergreen International. Therefore, Black should increase the portion in international equities as long as it is within policy statement guidelines.
C)
primarily to the management and stockholders of Evergreen International. Black should follow management's direction to potentially increase the value of the company.


This question relates to Standard III(A), Loyalty, Prudence, and Care. Black’s fiduciary duty is to the participants and beneficiaries of the pension plan according to ERISA. Black should act in their best interest in managing the funds. (Study Session 1, LOS 2.a,b)
With respect to the pension fund for Evergreen International, after Wood notices Black’s actions concerning the management’s instructions, he should:
A)
try to distance himself from Black’s activities.
B)
report Black’s activities to the police.
C)
do nothing because he knows what Black said about the covered call properties and her record is true.


According to Standard I(A), Knowledge of the Law, members and candidates must know the law and not knowingly assist in breaking the law. When questionable activities occur like Black’s option trading, the best course of action for an associate is distance him/herself and seek legal counsel. (Study Session 1, LOS 2.a,b)
With respect to Wood preparing to set up his own business, Wood violated the Standards:
A)
in his communication with his cousin.
B)
in his communication with his friend.
C)
by setting up trading accounts in the name of his company.


Wood violated Standard IV(A), Loyalty to Employer by contacting his cousin and advising him because the cousin could potentially be a client for his current firm. Since the friend had said he would not do business with Black, and Wood gave him no instructions, that was not a violation. Note that Standard IV(A) covers competing with an employer, not preparing to compete. Preparing to compete by setting up an office and other related activities are not a violation of the Standards. (Study Session 1, LOS 2.a,b)
Violations with respect to the use of the CFA designation occurred with:
A)
both the printing of the business cards by Black and the letters sent by Wood to his friend and cousin.
B)
the printing of the business cards by Black but not the letters sent by Wood to his friend and cousin.
C)
the letters sent by Wood to his friend and cousin but not with the printing of the business cards by Black.


Standard VII(B), Reference to CFA Institute, the CFA Designation, and the CFA Program, limits the use of the CFA designation to those who have passed all three levels of the CFA Program, have received their charters, and are charter holders in good standing. Wood may not put “CFA (expected 200X)” following his name because it is a violation of the Standard. However, he may state that he is a Level III candidate in the CFA program if he wishes. The printing of the business cards was not a prudent move, but since they are taking care not to distribute them until the appropriate time, no violation has occurred. In some sense, it is like a research report written in advance of an anticipated event. As long as the report is not released until after the event, no violation has occurred. (Study Session 1, LOS 2.a,b)
作者: cyber21    时间: 2012-3-20 15:21

In order to comply with Standard III(A), Loyalty, Prudence, and Care, an analyst needs to:
A)
comply with applicable fiduciary duty.
B)
perform both of the actions listed here.
C)
liquidate his personal holdings of all stocks that his client owns.


To comply with Standard III(A), the analyst must use reasonable care and exercise prudent judgment, always act for the benefit of clients, and determine and comply with applicable fiduciary duty.
作者: cyber21    时间: 2012-3-20 15:22

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)
Using directed brokerage.
B)
Voting all proxies of stocks the client owns.
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: cyber21    时间: 2012-3-20 15:24

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)
not in violation of the Code and Standards.
B)
in violation of his fiduciary duties regarding the municipal bond research but not so regarding the research on the small cap issues.
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: cyber21    时间: 2012-3-20 15:24

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)
a violation of only The Code of Ethics.
B)
a violation of both Standard III(A), Loyalty, Prudence, and Care, and the Code of Ethics.
C)
not in itself a violation of Standard III(A), Loyalty, Prudence, and Care, nor 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.



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