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Free CFA-Level-I Exam Braindumps (page: 59)

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A manager who pays a higher commission than would normally be paid to purchase the goods or services:

  1. may be violating the fiduciary duties owed to the client.
  2. none of these answers.
  3. is violating the fiduciary duties owed to the client.
  4. is not violating the fiduciary duties owed to the client.

Answer(s): C

Explanation:

This practice is commonly referred to as "paying up" for services.



Relationships with and Responsibilities to the Employer are dealt with under:

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

Answer(s): D

Explanation:

Relationships with and Responsibilities to the Employer are dealt with under Standard III.



Which of the following statements is/are correct under the Code and Standards?

  1. AIMR members are prohibited from undertaking independent practice in competition with their employer.
    II. Written consent from the employer is necessary to permit independent practice that could result in compensation or other benefit in competition with a member's employer.
    III. Written consent from the outside prospective client is necessary to permit independent practice that could result in compensation or other benefit in competition with a member's employer.
    IV. Members are prohibited from making arrangements or preparations to go into a competitive business before terminating their relationship with their employer.
  2. II, III and IV only.
  3. I and IV only.
  4. IV only.
  5. II and III only.

Answer(s): D

Explanation:

This question pertains to Standard III (B), which states that members may undertake independent practice that may result in compensation or other benefit in competition with a member's employer, so long as they obtain written consent from both their employer and those for whom they undertake the independent practice.
Statements II and III are consistent with this Standard. Statement I is incorrect because the Standards do not completely prohibit independent practice. Also, Statement IV is incorrect because the Standards allow members to make arrangements or preparations to go into competitive business so long as those arrangements do not interfere with their duty to their current employer.



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 compensation received for engaging in the paying up must be reported in writing to the manager's employer.
  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. at all times, the manager must seek best price and execution.

Answer(s): B

Explanation:

When paying up for goods and services, the requirements to be met include:
- ensuring that the goods or services purchased must be for "research service;"
- the commission paid must be reasonable in relation to the research and execution services received;
- the manager's soft-dollar practice must be disclosed, and
- at all times, the manager must seek best price and execution. However, there is no requirement for any disclosure of compensation to the manager's employer.






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