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Free CFA-Level-I Exam Braindumps (page: 85)

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When a manager is responsible for the portfolios of pension plans or trusts, the duty of loyalty is owed to the ________.

  1. entity who hires the manager
  2. corporation
  3. none of these answers
  4. manager's supervisor(s)
  5. stockholders of the firm
  6. board of directors
  7. investing public

Answer(s): C

Explanation:

The first step in fulfilling a fiduciary duty is to determine what the responsibility is and to who it is owed.
Members should take particular care in determining the identity of the "client" to whom the duty of loyalty is owed. In the context of an investment manager managing the portfolios of pension plans or trusts, the client is not the person or entity who hires the manager but, rather, the beneficiaries of the plan or trust. The duty of loyalty is owed to the beneficiaries.



According to the AIMR-PPS, subsectors or carve-outs of larger international composites

  1. may be used to create stand-alone composites only if the subsectors are actually managed as separate entities, they need not have their own cash allocations or currency management.
  2. may be used to create stand-alone composites only if the subsectors are actually managed as separate entities with their own cash allocations and currency management.
  3. may never be included in the composite with the parent company.
  4. may never be used to create stand-alone composites under any circumstances.

Answer(s): B

Explanation:

Subsectors or carve-outs of larger international composites may be used to create stand-alone composites only if the subsectors are actually managed as separate entities with their own cash allocations and currency management. Portfolios must not be switched from one composite to another unless documented changes in client guidelines make switching appropriate. This is a requirement for creation and maintenance of composites.



Rebecca Dustin, a freelance research analyst, is currently working on a research study on the pharmaceutical industry for KLM Brokerage. She has been using KLM's research facilities in this endeavor. There has been no written agreement between Rebecca and KLM about the project, though there was a verbal agreement that KLM would provide reasonable support for the research. In return, KLM would pay for the final report in case she uncovers something worthwhile. Rebecca is now interviewing with Jacob & Associates, another brokerage firm, for a project and is considering submitting a rough draft of her KLM study to them. If she does this without KLM's permission, she would

  1. not be violating the AIMR code, because she is the owner of the study.
  2. be violating Standard III (B) - Duty to Employer - because KLM has property rights over the study.
  3. be violating Standard III (B) - Duty to Employer - because KLM has first rights over the study.
  4. not be violating the AIMR code, since she is not under any written obligation to KLM.

Answer(s): C

Explanation:

Since Rebecca is acting as a freelance analyst under no written contractual agreement with KLM, the study does not belong to KLM. However, the verbal agreement and the support received from KLM make the first right to use the report a KLM property. Hence, Rebecca must allow KLM sufficient time to act upon her study before using it for any other purpose. Without KLM's permission, Rebecca cannot release the report without violating Standard III (B).



Standard IV (A) is known as ________.

  1. Interactions with Clients and Prospects
  2. Preservation of Confidentiality
  3. Professional Misconduct
  4. Prohibition against Use of Material Nonpublic Information
  5. Duty to Employer
  6. Fair Dealing
  7. None of these answers
  8. Investment Process

Answer(s): H

Explanation:

Standard IV (A) deals with the Investment Process. Standard III (B) deals with Duty to Employer. Standard IV (B.3) deals with Fair Dealing. Standard IV (B) deals with Interactions with Clients and Prospects. Standard V (A) deals with Prohibition against Use of Material Nonpublic Information. Standard IV (B.5) deals with Preservation of Confidentiality. Standard II (B) deals with Professional Misconduct.






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