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Test Prep CFA-Level-I Exam Questions
CFA® Level I Chartered Financial Analyst (Page 51 )

Updated On: 28-Feb-2026
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Various countries' securities laws permit a manager to pay up for goods and services without violating the manager's fiduciary duty, so long as the requirements of the law are followed. Each of the following are typical requirements, except:

  1. the manager's soft-dollar practice should be always maintained confidentially in his or her files.
  2. at all times, the manager must seek best price and execution.
  3. the commission paid must be reasonable in relation to the research and execution services received.
  4. the goods or services purchased must be for "research service."
  5. none of these answers.

Answer(s): A

Explanation:

The soft-dollar practice must be disclosed.



According to the AIMR-PPS, all actual fee-paying discretionary portfolios must be included in at least one composite defined according to

  1. managerial style of investment portfolio.
  2. similar strategy or investment objective.
  3. size of investment portfolio.
  4. date of portfolio inception.

Answer(s): B

Explanation:

All fee-paying discretionary portfolios must be included in at least one composite defined according to similar strategy or investment objective. This is a requirement for creation and maintenance of composites.



According to Standard IV (B.4), Priority of Transactions, a member is a "beneficial owner" if the member has each of the following, EXCEPT:

  1. the power to vote or direct the voting of the shares of the securities or investments.
  2. the power to dispose or direct the disposition of the security or investment.
  3. the authority to supervise reasonably and adequately the actions of those accountable to him.
  4. a direct or indirect pecuniary interest in the securities.

Answer(s): C

Explanation:

The authority to supervise those below the member has no relation to the concept of "beneficial owner." Also, supervisory responsibility is covered under Standard III (E).



According to Standard IV (B.7), Disclosure of Conflicts, the most prevalent conflict pertains to ________.

  1. members' ownership of stock in companies they recommend
  2. broker-sponsored limited partnerships formed to invest venture capital
  3. service on a board of directors
  4. none of these answers

Answer(s): A

Explanation:

Under Standard IV (B.7), Disclosure of Conflicts, the most prevalent conflict pertains to members' ownership of stock in companies they recommend. To avoid discrimination against members, sell-side members should disclose any materially beneficial ownership interest in a security or other investment that the member is recommending. Buy-side members should disclose their procedures for reporting requirements for personal transactions.



Various countries' securities laws permit a manager to pay up for goods and services without violating the manager's fiduciary duty, so long as the requirements of the law are followed. Each of the following are typical requirements, except:

  1. the manager's soft-dollar practice must be disclosed.
  2. the manager may seek satisfactory price and execution.
  3. the goods or services purchased must be for "research service."
  4. none of these answers.
  5. the commission paid must be reasonable in relation to the research and execution services received.

Answer(s): B

Explanation:

The manager must seek BEST price and execution.



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