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Free CFA-Level-I Exam Braindumps (page: 50)

Page 49 of 991
PDF with 3963 Questions

According to The Code of Ethics, members of AIMR shall: "Use reasonable care and exercise ________."

  1. each and every day
  2. none of these answers
  3. independent professional judgment
  4. optimal diversification
  5. open communications with clients

Answer(s): C

Explanation:

According to The Code of Ethics, members of AIMR shall: "Use reasonable care and exercise independent professional judgment."



Carlos recently attended a seminar on a new technique in identifying possible relative mispricings amongst stocks. Impressed by the presentation, he used the technique to suggest that two of his biggest clients rebalance their portfolios with a heavier emphasis on the stocks the technique identified as being mispriced. While presenting this suggestion to his clients, Carlos did not mention anything about the source of the ideas used. Before recommending the changes, he did not personally check the results nor did he try to find out if there were any significant caveats or assumptions associated with the methodology. He has:

  1. violated Standard II (B) - Professional Misconduct.
    II. violated Standard II (C) - Prohibition against Plagiarism.
    III. violated Standard IV (1) - Reasonable Basis & Representations.
    IV. violated Standard IV (B.1) - Fiduciary Duties.
  2. I, II and III
  3. I and III only
  4. I, II, III and IV
  5. II and III only

Answer(s): D

Explanation:

By not mentioning the sources of the results used, Carlos violated AIMR Standard II (C) related to Plagiarism.
By not exercising reasonable care in verifying the soundness of his recommendations, he violated Standard IV (A.1). However, Standard II (B) - Professional Misconduct - and Standard IV (B.1) - Fiduciary duties are not directly relevant to this situation.



Tiarera has just landed a big account for her fund and is in a joyous mood. To celebrate, she decides to go out to a bar with some of her friends and share some drinks. Tiarera, however, has a weak constitution and cannot handle alcohol very well. In fact, many times in the past, she has gotten into drunken altercations at bars. Tonight turns out to be no different; Tiarera and her friends are arrested for disorderly conduct and convicted for misdemeanor. Tiarera has

  1. has violated Standard II (B) - Professional Misconduct - because of a pattern of misconduct.
  2. not violated any AIMR standard since the arrest was for a misdemeanor, an offense not serious enough to trigger sanctions on the first occurrence.
  3. has violated Standard II (B) - Professional Misconduct - because she has been involved in a misdemeanor.
  4. not violated any AIMR standard since the arrest took place due to activities not related to her work.

Answer(s): A

Explanation:

A single instance of misdemeanor is generally not serious enough to constitute a violation of Standard II (B).
However, Tiarera has shown a pattern of professional misconduct that reflects poorly on her firm and her profession, thus violating the AIMR standard.



Which of the following is true about Standard III (B) - Duty to Employer?

  1. It prohibits a departing employee from making arrangements to enter independent practice prior to leaving current employment.
  2. It precludes a member from entering into an independent business that is in direct competition with the employer.
  3. It requires the employee to obtain written permission from the employer as well as the outside entity before entering independent practice.
  4. It requires departing employee to give all the details about the independent practice before leaving the current employment.

Answer(s): C

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.






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