QUESTION: 345

Young, a portfolio manager with Northside Bank, has just been given investment authority for a newly acquired pension account. Client objectives have not yet been established. On the day the account is received, $2 million in bonds, representing 4 percent of the portfolio, mature. Which of the following is Young's best course of action on that day?

Invest the proceeds in cash equivalents until a meeting can be arranged to establish fund objectives.
Contact the client's former investment advisor and take investment action based on previously used guidelines.
Invest the proceeds in accordance with the bank's current asset allocation strategy.
Make no decision until client objectives have been established.

Answer(s): A

Explanation:

This question relates to Standard IV (B.2), Portfolio Investment Recommendations and Actions. This standard requires that members make a reasonable inquiry into a client's financial situation, investment experience and investment objectives prior to making any investment recommendation. To rely on outdated investment guidelines, or firmwide strategies, or to hold the funds, would be inappropriate because it might violate a member's duty to safeguard client's interests. The best course of action is to invest in cash equivalents until a meeting can be arranged to establish fund objectives, because it adequately protects the client's interest until investment objectives are established.

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QUESTION: 346

Jamison is a junior research analyst with Howard & Howard, a brokerage and investment banking firm. Howard & Howard's mergers and acquisitions department has represented the Britland Company in all of its acquisitions for the past 20 years. Two of Howard & Howard's senior officers are directors of various Britland subsidiaries. Jamison has been asked to write a research report on Britland. What is the best course of action for her to follow?

Jamison should not write the report because the two Howard officers are constructive insiders.
Jamison may write the report but must refrain from expressing any opinions because of the special relationships between the two companies.
Jamison may write the report if she discloses the special relationships with the company in the report.
Jamison may write the report so long as the officers agree not to alter it.

Answer(s): C

Explanation:

The question involves Standard IV (B.7), Disclosure of Conflicts to Clients and Prospects. There are two conflicts of interest that must be disclosed: (1) the company is a client of Jamison's employer, (2) two directors of the company are senior officers of her employer. As long as the relationship the analyst's employer has with the company is disclosed, the analyst is not prevented from writing a report. She can or not express opinions, which is irrelevant to her duty to disclose a conflict of interest, which is the relationship between the two companies.

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QUESTION: 347

When formulating an investment policy for a client, all of the following fall under "investor constraints," except ________.

expected cash flows
type and nature of clients
regulatory and legal circumstances
investor preferences, circumstances and unique needs
liquidity needs
none of these answers
proxy voting
investable funds

Answer(s): B

Explanation:

Type and nature of clients is considered under the "client identification" category.

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QUESTION: 348

What is the name of the act enacted in 1940 that reflects a Congressional recognition of the "delicate" fiduciary nature of an investment advisory relationship and the intent to eliminate, or at least to expose all conflicts of interest?

The Investment Company Act
The Congressional Investor's Protection Act
The U.S. Investment Advisers Act
The U.S. Fiduciary-Investor Act

Answer(s): C

Explanation:

The U.S. Investment Advisers Act of 1940 (Advisers Act) states "that advisors cannot employ any device or scheme to defraud any client or prospective client; engage in any transaction or course of business that may operate as a fraud or deceit upon any client or prospective client; engage in transactions as a principle or as an agent in a client's account without first disclosing the transaction to the client and receiving the client's consent; or engage in any act or course of business that is fraudulent, deceptive, or manipulative."

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Free CFA-Level-I Exam Braindumps (page: 87)

QUESTION: 345

Explanation:

QUESTION: 346

Explanation:

QUESTION: 347

Explanation:

QUESTION: 348

Explanation: