QUESTION: 433

Standard III (B) is known as ________.

Interactions with Clients and Prospects
Preservation of Confidentiality
None of these answers
Fair Dealing
Investment Process
Duty to Employer
Prohibition against Use of Material Nonpublic Information
Professional Misconduct

Answer(s): F

Explanation:

Standard IV (A) deals with the Investment Process. Standard III (B) deals with Duty to Employer. Standard IV (B.3) deals with Fair Dealing. Standard IV (B) deals with Interactions with Clients and Prospects. Standard V (A) deals with Prohibition against Use of Material Nonpublic Information. Standard IV (B.5) deals with Preservation of Confidentiality. Standard II (B) deals with Professional Misconduct.

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QUESTION: 434

The allocation of shares in oversubscribed IPOs to investment managers for their personal account is a perk that is most clearly a violation of Standard ________.

II (B) - Professional Misconduct
IV (A.3) - Independence and Objectivity
None of these answers
IV (B.6) - Prohibition against Misrepresentation
IV (B.8) - Disclosure of Referral Fees

Answer(s): B

Explanation:

External sources may try to influence the investment process by offering analysts and portfolio managers a variety of perks. Corporations may be seeking expanded research coverage; issuers and underwriters may wish to promote new securities offerings; brokers typically want to increase commission business. The perks may include gifts, invitations to lavish functions, tickets and so on. One type of perk that has gained particular notoriety is the allocation of shares in oversubscribed IPOs to investment managers for their personal accounts.
This practice is a violation under Standard IV (A.3).

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QUESTION: 435

Tomonaga Olawando is a research analyst currently doing research on Cleebok Shoes, a footwear manufacturer infamous for its exorbitantly priced shoes. Tomonoga has been interviewing Pollyanna Givens, a senior vice president with the public relations division. Pollyanna has told him that the investment community has underestimated the payoffs from Cleebok's plan to outsource shoe production to Mexico, thus cutting productions costs significantly. She told him her estimate puts thecost savings close to $600 million, as against the figure of $370 million quoted by a few active analysts. In his report, Tomonaga states that the extra savings of $230 million a year will raise the stock price by 26% over the next year and hence, represents a great buy.
Tomonaga has

not violated any code of ethics.
II. has violated Standard IV (1) - Reasonable Basis & Representations.
III. has violated Standard IV (2) - Research Reports.
IV. has violated Standard IV (B.2) - Portfolio Investment Recommendations and Actions.
III only
II and III only
II, III and IV only
I only

Answer(s): B

Explanation:

By taking an opinion of a person and representing as a fact in his research report, Tomonaga has violated Standards IV (A.1) and IV (A.2).

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QUESTION: 436

The AIMR-PPS recommend that both ________ and ________ risks be presented in conjunction with composite returns.

absolute; unsystematic
total; market
external; internal
unsystematic; systematic

Answer(s): B

Explanation:

Total risk relates to the variability of actual (absolute) returns not relative to the market. Market (systematic) risk relates to the volatility of returns relative to the market or some other benchmark.

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Free CFA-Level-I Exam Braindumps (page: 109)

QUESTION: 433

Explanation:

QUESTION: 434

Explanation:

QUESTION: 435

Explanation:

QUESTION: 436

Explanation: