QUESTION: 21

Standard V (A) deals with ________.

Prohibition against Use of Material Nonpublic Information
Disclosure of Conflicts to Clients and Prospects
Prohibition against Misrepresentation
Disclosure of Referral Fees
Performance Presentation
Priority of Transactions
Preservation of Confidentiality

Answer(s): A

Explanation:

Standard V (A) prohibits members who possess material nonpublic information related to the value of a security from trading in that security if such trading would breach a duty or if the information was misappropriated or relates to a tender offer.

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QUESTION: 22

Andy Pilling is a bond trading specialist who recently started a special fund, the "Structured Bond Fund." The strategy behind this fund is quite complex, involving a mix of highly speculative, high-yield bonds and various tax-free municipal bonds for some stability. Andy has a strong view that the economy will remain vibrant and bullish over the next two years and hence, is not worried about the risky bonds. Assuming a falling rate scenario in this case allows the fund to project an expected return 130 basis points above the S&P 500 return. In his special report, Pilling does not disclose such assumptions nor does he reveal any details about the bond strategy. He does analyze the state of the economy and the future outlook in the report. Based on his reputation and his association with some big name academics, Pilling is able to obtain capital of close to 75 million dollars on this fund alone. Andy has:

not violated any standards in the AIMR Code of Ethics.
violated Standard IV (6) - Prohibition Against Misrepresentation.
violated Standard IV (A.2) - Research Reports - by not revealing the assumptions and details about the strategy.
violated Standard IV (B.1) - Fiduciary Duties - by not disclosing the nature of the strategy.

Answer(s): C

Explanation:

Standard IV (A.2) - Research Reports requires members to describe the basic characteristics of an investment, the degree of risks involved and scenario analysis to illustrate possible losses under different market conditions. By suppressing such relevant details, Pilling has violated the AIMR Code of Ethics.

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QUESTION: 23

According to Standard IV (A.2), members should consider including the following information in research reports, except:

the methodology that drove the investment decisions.
yield-to-maturity.
annual amount of income expected.
degree of uncertainty associated with the cash flows.
business, financial, political, sovereign and market risks.
none of these answers.
degree of marketability / liquidity.
expected annual rate of return.

Answer(s): A

Explanation:

All the information has to be included in the research reports except the methodology that drove the investment decision, which is part of the 'maintaining files' compliance procedure for Standard IV (A.1).

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QUESTION: 24

The disclosures for retroactive compliance apply to composites formulated prior to ________.

January, 1989
January, 1992
January, 1991
January, 1993
January, 1990

Answer(s): D

Explanation:

The effect date to be in compliance with AIMR-PPS was January 1, 1993. Any composites which predate the effective date can be brought into compliance retroactively.

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QUESTION: 21

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QUESTION: 23

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QUESTION: 24

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