QUESTION: 9

Which of the following relating to compliance procedures for complying with Standard III (E) is false? The compliance procedures should:

none of these answers.
outline permissible conduct.
delineate procedures for reporting violations and sanctions.
designate a team of outside colleagues to form a review board.
outline the scope of the procedures.
be easy to understand.

Answer(s): D

Explanation:

The compliance officer should be designated from within the firm.

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According to the AIMR-PPS for venture and private placements, ________ internal rate of return must be presented since inception of the fund and be net of fees, expenses and carry to the limited partner.

limited
extended
cumulative
general

Answer(s): C

Explanation:

Cumulative internal rate of return must be presented since inception of the fund and be net of fees, expenses and carry to the limited partner. Irr must be calculated based on cash-on-cash returns plus residual value.

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QUESTION: 11

Which of the following AIMR Standards states that referral fees must be disclosed in writing to clients or customers?

V
VI (A)
IV (B.8)
IV

Answer(s): C

Explanation:

Standard IV (B.8) - Disclosure of Referral Fees states: "Members shall disclose to clients and prospects any consideration or benefit received by the member or delivered to others for the recommendation of any services to the client or prospect."

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QUESTION: 12

Omega Prime Securities is a sizable investment bank that undertakes security issuances on behalf of small and medium-size businesses. Treffil Ellis is the senior vice president of corporate finance at Omega. Treffil, on one of his golf junkets, made acquaintance with Tralth Trevor, owner of a growing chain of resort hotels. Tralth invites Treffil to his estate mansion the next day and over drinks, asks him how fast Omega could issue equity- linked callable notes to finance the $200 million construction of new hotel businesses in Cairo and Bali. He

forthrightly tells him that Omega could receive as much as 150 basis points above the normal fee if the issuance could be completed within the month. Treffil knows that this is not enough time to complete a research on Tralth's business and determine the issue price. However, he does know that his research wing could quickly do a comparison with one of the other hotel chains and determine an approximate issue price. He instructs his department to do so. In a month, the public offering is ready for issuance and Omega ends up making almost $15 million more than on other similar business deals. Treffil receives commendation from the CEO for "going beyond the call of duty for his employer." Treffil has

violated Standard IV (B.3) - Fair Dealing.
II. not violated any code of ethics.
III. violated Standard IV (1) - Reasonable Basis & Representations.
IV. violated Standard IV (B.1) - Fiduciary Duties.
III and IV only
I and III only
III only
II only

Answer(s): C

Explanation:

If adequate research is not put into determining the fair price of a security issue, investors could end up paying a price that has no relevance to the intrinsic value of the security. This is in direct violation of Standard IV (A.1) - Reasonable Basis & Representations.

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Free CFA-Level-I Exam Braindumps (page: 3)

QUESTION: 9

Explanation:

QUESTION: 10

Explanation:

QUESTION: 11

Explanation:

QUESTION: 12

Explanation: