QUESTION: 353

Armina Stump is a junior portfolio manager on the verge of a promotion at Black Stallion, a strongly bullish fund management firm. Armina reports to Brouster Bragg, who has been with the firm for about 8 years. Brouster has been busy over the past 6 months and has not been able to keep up with account reviews but has complete faith in his subordinate managers. Now that it's time for Armina's promotion, he has been going over her transactions in the past 6 months and has discovered that all her trades are going through Blackwell Brokers. Blackwell is a well-reputed brokerage firm and is known to give extremely competitive prices and speed on trade executions. Due to the bulk transactions that originate with Armina, Blackwell has been providing research reports and investment tips to Armina which she has found extremely useful. Brouster does not find anything wrong with this, though he has now instructed Armina to file her monthly reports in more detail and in a timely fashion. She explained that due to company work and visits to their Los Angeles office, she had not been able to complete the reports for two months but she would take additional care in the future in this regard. Black Stallion has no official policy about filing of account reports. Given this entire sequence of events, your analysis as a student of AIMR ethics code should reveal which of the following?

Armina has violated Standard I - Fundamental Responsibilities by not filing the reports on time.
II. Brouster has violated Standard III (E) - Responsibilities of Supervisors by failing to enforce proper supervision.
III. Armina has violated Standard IV (B.1) - Fiduciary Duties by routing her orders solely through Blackwell.
I and II only
II and III only
II only
I, II and III

Answer(s): C

Explanation:

Since Black Stallion does not require a monthly report from its portfolio managers, Armina has not violated company policy because she is not responsible for monthly reports. However, Brouster still must develop procedures to monitor the actions of his subordinate portfolio managers since he is responsible for their actions. Indeed, the absence of such a policy at Black Stallion makes it incumbent upon Blackwell to be more diligent about monitoring. By failing to regularly review the accounts for 6 months, Blackwell has left open the possibility of manipulation by his subordinates and is thus in violation of Standard III (E) - Responsibilities of Supervisors. Finally, since Armina is getting best price execution from Blackwell, she has not violated any Fiduciary duties. The fact that she receives free research advice due to bulk trades does not automatically imply that her client accounts are being hurt or being made to pay for the services. Additionally, it should be noted that if Blackwell were to wine and dine Armina as a symbol of appreciation or send her lavish gifts, Armina may be in violation of the Standard IV (A.3) -Independence and Objectivity - because acceptance of such gifts creates an appearance of impropriety even if none is present.

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QUESTION: 354

Which of the following are not required disclosures under the Performance Presentation Standards?

Portfolio size range and percentage of total assets in the same class.
The existence of a minimum asset size for the inclusion in composites.
The inclusion of any non-fee paying portfolios in composites.
Whether balanced portfolio segments are included in single-asset composites.

Answer(s): A

Explanation:

The existence of a minimum asset size below which portfolios are excluded from a composite must be disclosed. Whether balanced portfolio segments are included in single-asset composites and an explanation of how cash has been allocated among segments must be disclosed. The inclusion of any non-fee-paying portfolios in composites and included in the definition of total firm assets must be disclosed. Only the number of portfolios, their description, the amount of assets in a composite, the percentage of the firm's total assets the composite represents need be disclosed. The portfolio size range or percentage of total assets in the same class are only recommended, not required disclosures.

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QUESTION: 355

Information is ________ until it has been disseminated to the marketplace in general and investors have had an opportunity to react to the information.

none of these answers
walled
material
inside
nonpublic

Answer(s): E

Explanation:

Standard V (A) deals with the responsibility of members when they are dealing with the receipt and disclosure of material, nonpublic information. Information is "nonpublic" until it has been disseminated to the marketplace in general and investors have had an opportunity to react to the information. Mere possession of material nonpublic information will trigger trading restrictions under Standard V (A).

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QUESTION: 356

According to the Standards of Practice Handbook, how frequently should managers gather information on client

circumstances, occupation, investment objectives and risk tolerances?

at least monthly
at least annually
at least every two years
at least every five years

Answer(s): B

Explanation:

Under Standard IV (B.2), members have a responsibility to consider carefully the needs, circumstances and objectives of the client when determining the appropriateness of a given investment action. In order to provide sound advice, members should gather information on client circumstances, occupation, investment objectives and risk tolerances at the inception of any client relationship and such an inquiry should be repeated at least annually. This will ensure that investment recommendations take into account the diversity and changing nature of portfolio and client characteristics.

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Free CFA-Level-I Exam Braindumps (page: 89)

QUESTION: 353

Explanation:

QUESTION: 354

Explanation:

QUESTION: 355

Explanation:

QUESTION: 356

Explanation: