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Free CFA-Level-I Exam Braindumps (page: 11)

Page 10 of 991
PDF with 3963 Questions

Corporate directors are governed by the ________. Trustees are governed by the ________.

  1. none of these answers
  2. "common sense doctrine"; business judgment rule
  3. business judgment rule; Prudent Man Rule
  4. business judgment rule; "common sense doctrine"
  5. "common sense doctrine"; Prudent Man Rule
  6. Prudent Man Rule; business judgment rule
  7. Prudent Man Rule; "common sense doctrine"

Answer(s): C

Explanation:

This question is trying to highlight the different standards of business care fiduciaries must uphold in charitable organizations and trusts respectively. Thus, fiduciaries at charities are bound by the business judgment rule, since they are comparable to directors of business corporations. In contrast, trustees are governed by the Prudent Man Rule. This distinction in the standard duties applicable to fiduciaries in different situations should be recognized.



Maria Golino is a financially savvy client of Hector Gomez, a portfolio manager with a small investment firm. Maria recently directed Hector to execute all trades on her behalf with Omega Brokerage. Omega charges higher commissions than most other brokerage firms but in this case, has agreed to provide research to Hector on behalf of Maria. Hector does not object to this and starts directing Maria's trades to Omega. Hector has

  1. violated Standard IV (B.1) - Fiduciary Duties.
  2. violated Standard IV (A.2) - Research Reports.
  3. violated Standard IV (B.8) - Disclosure of Referral Fees.
  4. not violated any standards.

Answer(s): D

Explanation:

The practice in which a portfolio manager directs trades to a particular brokerage in exchange for additional goods or services at the behest of the client is known as "directed brokerage." This practice is not in violation of any AIMR standards since the portfolio manager is acting on the instructions of his client and the benefits accrue to the client. Standard IV (B.1) - Fiduciary Duties - and the Topical Study "Fiduciary Duty."



Another name for "covered" person is ________.

  1. guardian
  2. none of these answers
  3. ombudsman
  4. access person
  5. fiduciary
  6. supervisor

Answer(s): D

Explanation:

Access or covered persons have knowledge of pending or actual investment recommendations or action. The firm's definition of access (covered) person should be broad enough to cover all people with that knowledge.



Which of the following can be found in Standard IV?

  1. Members must use the CFA designation in a dignified manner.
  2. Members shall make reasonable and diligent efforts to avoid any material misrepresentation in any research report or investment recommendation.
  3. Members shall comply with any prohibitions on activities imposed by their employer if a conflict of interest exists.
  4. Members shall maintain knowledge of AIMR's Code of Ethics.
  5. If members receive material nonpublic information in confidence, they shall not breach that confidence by trading or causing others to trade in securities to which such information relates.

Answer(s): B

Explanation:

Standard IV states: "Members shall make reasonable and diligent efforts to avoid any material misrepresentation in any research report or investment recommendation."






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