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Free CFA-Level-I Exam Braindumps (page: 5)

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Which of the following statements clearly conflicts with the recommended procedures for compliance presented in AIMR's Standards of Practice Handbook?

  1. Investment recommendations may be changed by an analyst without prior approval of a supervisory analyst.
  2. Prior approval must be obtained for the personal investment transactions of all employees.
  3. For confidentiality reasons, personal transactions should not be compared with those of clients or the employer unless requested by regulatory organizations.
  4. Personal transactions should be defined as including transactions in securities owned by the employee and member of his or her immediate family and transactions involving securities in which the employee has beneficial interest.

Answer(s): C

Explanation:

This question deals with the compliance procedures relating to personal investments of members. Employees should compare personal transactions of employees with those of clients on a regular basis, regardless of the existence of a regulatory organization. Such comparisons ensure that members' personal trades do not conflict with their duty to their clients. All the other statements do not conflict with the procedures in the Handbook.



Trust Fund is a reasonably successful investment management firm that has as its clients a few pension plans. Trust Fund executes all of its trades with Prime Brokerage, an average brokerage firm. Prime Brokerage charges higher commissions than comparable players in the market but in return, provides investment research on the stocks which are part of the pension plan assets under Trust Fund's management. Portfolio managers at Trust Fund know about the close relationship on the golf links between Prime Brokerage's chief broker, Ralph Fiennes, and Trust Fund's CEO, Armis Arvanitis. They also believe that the research provided by Prime

Brokerage, while not superlative, is quite useful and justifies the excess expense in brokerage. This "soft- dollars" practice is disclosed in Trust Fund's official documents and contracts but Sisko, a freshly minted CFA charterholder, thinks that Trust Fund managers are in violation of the AIMR code of Ethics. Which of the following is true?

  1. Trust Fund's managers are violating Standard IV (B.8) - Disclosure of Referral Fees by not revealing the arrangement to pension plan beneficiaries.
  2. Trust Fund's managers are violating Standard IV (1) - Fiduciary Duties by not executing the trades at the lowest price available.
  3. Sisko is not applying the AIMR code correctly. Trust Fund's managers are not violating any AIMR standards.
  4. Trust Fund's managers are violating Standard IV (B.3) - Fair Dealing by unfairly diverting funds from the plan assets to Prime Brokerage through higher fees.

Answer(s): C

Explanation:

The practice of using "soft dollars" (i.e., the usage of brokerage for purchase of research services) is not forbidden by the AIMR code or securities laws, as long as they are commensurate with the services received and the practice is disclosed to the clients. In this case, there is no evidence that Trust Fund is overpaying Prime Brokerage or that it is not seeking best price and execution. Hence, Sisko is mistaken and Trust Fund managers are not in violation of the AIMR code.



A financial analyst should conduct himself with ________, competence and dignity and act in an ethical manner in his dealings with the public, clients, customers, employers, employees and fellow analysts.

  1. integrity
  2. morality
  3. none of these answers
  4. honor
  5. principal

Answer(s): A

Explanation:

The Code of Ethics: "Members of AIMR shall act with integrity, competence, dignity and in an ethical manner when dealing with the public, clients, prospects, employers, employees and fellow members."



Everly Smith has passed Level II of the CFA examination. While studying for Level III, he circulates his resume stating that he has "completed Charter Financial Analyst II" and his resume lists his name as "Everly Smith, CFA II." Which of these following statements is correct?

  1. Everly Smith is not in compliance with the standards regarding use of the CFA designation. He may state he "completed Chartered Financial Analyst II," but cannot put "CFA II" after his name.
  2. Everly Smith is not in compliance with the standards regarding use of the CFA designation. He can neither state he "completed Chartered Financial Analyst II" nor "Everly Smith, CFA II."
  3. Everly Smith is not in compliance with the standards regarding use of the CFA designation. Since he is registered for Level III he should state "Everly Smith, CFA III." D. Everly Smith is in compliance with the standards regarding use of the CFA designation.

Answer(s): B

Explanation:

Everly Smith has violated Standard II (A), Use of Professional Designation. There is no designation for someone who has passed Level I, Level II, or Level III, so he may not state "Everly Smith, CFA II." He also can not state he has "completed Charter Financial Analyst II." However, he may state that he is a Level III candidate in the CFA Program. If he passed Level II, but was not registered for Level III he could state "I passed Level II of the CFA Program in the year 19--."






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