Question 6

Mary Kim, CFA, 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. Kim may:

A)    trade ahead of her clients in Newasia only.

B)   trade ahead of her clients in Newasia only, as long as she has made full disclosure to her clients that she reserves the right to do this.

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.

D)   not trade ahead of her clients in either country.

Question 7

A member's investment recommendation is least likely to have a reasonable and adequate basis if it is based on:

A)    the well-reasoned opinion of a colleague.

B)   a report by the firm's research department.

C)   the research of another party or firm that has exercised diligence and thoroughness.

D)   a quantitatively oriented process designed to rank securities.

Question 8

Marshall Hopkins reports data for the Alliance Equity Fund. He states in an information sheet that "Alliance has produced a one-year return of 37%." This result was based on Alliance's best year in the past five. He notes this in a footnote at the bottom of the information sheet. Hopkins' action is:

A)    in accordance with the Code and Standards since he has indicated the basis in a footnote.

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

C)   a violation of the Standard concerning performance presentation.

D)   a violation of the Standard concerning professional misconduct.

Question 9

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 independence and objectivity.

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

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

D)   not in violation of the Code and Standards.

Question 10

Danielle Smith, CFA, is a representative for Fairfax Securities.  She has contacted Willard Mangan, one of her clients, concerning her recommendation that Mangan invest in 20-year bonds that will be issued by Continental Telephone, Inc.  She informs Mangan that:

• Continental Telephone is the strongest company in its industry.

• Continental Telephone has an extremely strong credit rating.

• Based on these factors, “payment of these obligations is assured…it’s like a government bond with a corporate interest rate.”

Smith has:

A)    violated the Code and Standards by implying that eventual payment of the bonds was assured.

B)   not violated the Code and Standards if her statements were made verbally and not in writing.

C)   violated the Code and Standards by attempting to persuade Mangan that Continental Telephone was a strong company and by implying that eventual payment of the bonds was assured.

D)   not violated the Code and Standards because her statements cannot be disproven.

[此贴子已经被作者于2008-11-8 18:05:19编辑过]

Question 6

Mary Kim, CFA, 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. Kim may:

A)    trade ahead of her clients in Newasia only.

B)   trade ahead of her clients in Newasia only, as long as she has made full disclosure to her clients that she reserves the right to do this.

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.

D)   not trade ahead of her clients in either country.

The correct answer was D) not trade ahead of her clients in either country.

Under Standard I(A) Knowledge of the Law, Mary Kim, as a CFA charterholder, must apply the CFA Institute Code and Standards or the controlling law, whichever is stricter. Because Standard VI(B) 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.

This question tested from Session 1, Reading 2-I, LOS A.

Question 7

A member's investment recommendation is least likely to have a reasonable and adequate basis if it is based on:

A)    the well-reasoned opinion of a colleague.

B)   a report by the firm's research department.

C)   the research of another party or firm that has exercised diligence and thoroughness.

D)   a quantitatively oriented process designed to rank securities.

The correct answer was A) the well-reasoned opinion of a colleague.

The opinion of a colleague alone is not an appropriate basis for a recommendation. Recommendations must have a reasonable and adequate basis, supported by appropriate research and investigation.

This question tested from Session 1, Reading 2-V, LOS A.

Question 8

Marshall Hopkins reports data for the Alliance Equity Fund. He states in an information sheet that "Alliance has produced a one-year return of 37%." This result was based on Alliance's best year in the past five. He notes this in a footnote at the bottom of the information sheet. Hopkins' action is:

A)    in accordance with the Code and Standards since he has indicated the basis in a footnote.

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

C)   a violation of the Standard concerning performance presentation.

D)   a violation of the Standard concerning professional misconduct.

The correct answer was C)

The Code and Standards stipulate that members shall "make reasonable efforts to assure that performance information is a fair, accurate, and complete." Since it is obvious that most investors would assume that one-year performance data was for the previous year, his method of reporting is neither reasonable nor fair, and he is in violation of the Standard. The fact that he has indicated the basis of the presentation in a footnote does not place him in compliance with the Standard.

This question tested from Session 1, Reading 2-III, LOS D.

Question 9

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 independence and objectivity.

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

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

D)   not in violation of the Code and Standards.

The correct answer was D) not in violation of the Code and Standards.

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.

This question tested from Session 1, Reading 2-I, LOS B.

Question 10

Danielle Smith, CFA, is a representative for Fairfax Securities.  She has contacted Willard Mangan, one of her clients, concerning her recommendation that Mangan invest in 20-year bonds that will be issued by Continental Telephone, Inc.  She informs Mangan that:

• Continental Telephone is the strongest company in its industry.

• Continental Telephone has an extremely strong credit rating.

• Based on these factors, “payment of these obligations is assured…it’s like a government bond with a corporate interest rate.”

Smith has:

A)    violated the Code and Standards by implying that eventual payment of the bonds was assured.

B)   not violated the Code and Standards if her statements were made verbally and not in writing.

C)   violated the Code and Standards by attempting to persuade Mangan that Continental Telephone was a strong company and by implying that eventual payment of the bonds was assured.

D)   not violated the Code and Standards because her statements cannot be disproven.

The correct answer was A)

Standard I(C), Misrepresentation, prohibits members from making or implying, orally or in writing, any assurances or guarantees regarding any investment. The verbal statements by Smith that payment was assured violated this Standard.

This question tested from Session 1, Reading 2-I, LOS C.

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