QUESTION: 45

Cariella is a junior analyst who is currently preparing a report on a diamond producing firm, Dense Carbon, Inc. Dense Carbon recently announced that the results of a mining survey in its South African diamond mines were in, which revealed substantial amounts of diamond reserves for the first time. It has offered to take a few industry analysts for a tour of the facilities and take stock of the situation first hand. During this tour, all expenses, including air-fare and basic accommodations, were provided for by Dense Carbon. Since the visit spanned a weekend, Dense Carbon also arranged for a Safari tour for all the analysts. Cariella did not consider the safari to be an undue entertainment, given the fact that the analysts had to be in the middle of nowhere for 5 days. She was quite assiduous in her appraisal of the mining reserves and in the final analysis, the tour proved extremely valuable to her analysis. However, she did not reveal the fact about the Safari trip to her employer. Cariella has

violated Standard III (C) - Disclosure of Conflicts to Employer.
II. violated Standard IV (1) - Reasonable Basis and Representations.
III. violated Standard IV (3) - Independence and Objectivity.
IV. not violated the AIMR code of ethics.
I only
I and III only
I, II and III only
IV only

Answer(s): B

Explanation:

Standard IV (A.3) - Independence and Objectivity requires members to use reasonable care and judgment while making investment recommendations. In particular, it requires that members avoid even appearances of conflict of interest or circumstances that could affect their independence or objectivity. While Dense Carbons travel arrangements for the analysts might not be considered an unnecessary "gift" (this is a gray area), the safari definitely is an unacceptable arrangement from the AIMR code of ethics' perspective. By accepting this gift, Cariella violated Standard IV (A.3). By not disclosing this fact to her employer, she violated Standard III (C)
- Disclosure of Conflicts to Employer.

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QUESTION: 46

Arbaaz, an AIMR member, works for an investment advisory firm, Leon Investments. His friend, Shahzad, recently asked him for some investment recommendations. Arbaaz analyzed Shahzad's portfolio over a weekend and suggested some changes. While he did not accept any remuneration, Shahzad promised him some gifts if his portfolio "performed well." Arbaaz did not inform his employer since he thought he was helping

a friend and in any case, the Shahzad's account was extremely small and there were no financial payments.
Arbaaz has:

violated Standard III (B), Duty to Employer.
has not violated Standard III (B), Duty to Employer, because there was no financial remuneration.
has not violated Standard III (B), Duty to Employer, because Shahzad's account was too small to be deemed lost business for Leon Investments.
has not violated Standard III (B), Duty to Employer, because Arbaaz is free to do what he wants on his time as long as it doesn't affect Leon Investments.

Answer(s): A

Explanation:

While Arbaaz did not receive any monetary compensation, there is a possibility of gifts in the future. Standard III (B) applies even when there is no actual receipt of compensation; what is important is the possibility of future payments in cash or kind. By not obtaining a written permission from his employer before advising Shahzad, Arbaaz violated Standard III (B).

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QUESTION: 47

"Restricted Periods" are discussed in Standard IV (B.4), Priority of Transactions. Another name for restricted periods is ________ periods.

blackout
restrained
none of these answers
captive

Answer(s): A

Explanation:

Firm procedures should prevent managers or employees from initiating trades in a security for which their firms have a pending buy or sell order within a 24-hour period. Firms must determine specific requirements relating to such blackout, or restricted periods.

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QUESTION: 48

Liz Hurley is an investment advisor who has recently started advising a client, Zeta, regarding investment decisions. Zeta lives in Imphal, where investment laws are quite lax, almost non-existent. Hurley is domiciled in Britania, where investment laws clearly specify that the laws governing finance professionals in any given case are the laws that govern their clients. Britania laws, in general, are far stricter than the AIMR code of ethics. In her dealings with Zeta, Hurley must follow

Imphal's laws.
Britania's laws.
AIMR's code of ethics.
a combination of Britania's laws and AIMR code which results in a stricter set of laws.

Answer(s): C

Explanation:

In her dealings with Zeta, Hurley is governed by Imphal's laws, as specified by Britania's laws. Since Imphal laws are almost non-existent, the code of ethics sets a stricter standard and hence, as an AIMR member, Hurley must follow the AIMR code. Standard I.

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QUESTION: 45

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QUESTION: 47

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QUESTION: 48

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