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Free CFA-Level-I Exam Braindumps (page: 43)

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The ultimate responsibility to ensure compliance with code rests with:

  1. every member of the firm.
  2. the CEO of the firm.
  3. all of these answers.
  4. the highest ranking AIMR member of the firm.

Answer(s): D

Explanation:

While every member must always comply with the Code, Standard III (A) stipulates that ensuring compliance with the Code in an organization ultimately is the responsibility of the senior most AIMR member of the firm reporting to a non-member. He must make sure that the firm environment is sympathetic to compliance with the Code.



Arbliss, an AIMR member, has been working for a financial software company, Supersoft Corp. for the past 3 years. He now wants to leave the firm and start his own software proprietorship. Which of the following will not constitute a violation of the AIMR code?

  1. Making arrangements to set up the proprietorship prior to leaving current employment, without Supersoft knowing about it.
    II. Soliciting Supersoft's clients prior to the termination of employment.
    III. Using a confidential software error-checking program he had developed for Supersoft for his own purposes.
  2. I only
  3. III only
  4. II and III only
  5. I and III only

Answer(s): A

Explanation:

Standard III (B) - Duty to Employer - does not preclude a member from entering into independent practice while still employed. It does require the employee to obtain written permission from the employer as well as the outside entity before doing this. It does not prohibit a departing employee from making arrangements to enter independent practice prior to leaving current employment, as long as such preparations do not constitute a breach of loyalty toward the employer. Activities that can be a breach of loyalty include misappropriation of trade secrets, misuse of confidential information, solicitation of the firm's clients before the termination of unemployment and in general, any activity that would destabilize the firm's operations.



Relationships with and Responsibilities to the Investing Public are dealt with under:

  1. Standard V
  2. None of these answers
  3. Standard III
  4. Standard II
  5. Standard IV
  6. Standard I

Answer(s): A

Explanation:

Relationships with and Responsibilities to the Investing Public are dealt with under Standard V.



The ________ states that broker/dealers should be subject to strict standards because they are advertising themselves as market professionals.

  1. cover canon
  2. canopy principle
  3. posting criterion
  4. shingle theory
  5. marketing regulation

Answer(s): D

Explanation:

The shingle theory states that broker/dealers should be subject to strict standards because they are "hanging out their shingles," or, advertising themselves as market professionals. The theory states that inherent in the relationship between brokers/dealers and their clients is the representation that the customer will be dealt with fairly. Brokers/dealers are in a position to exploit their customers' trust and ignorance and therefore they are held to a higher duty of care.






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