Ethics

GIPS Provision 0.A.7, statements referring to the calculation methodology as being "in accordance", "in compliance", or "consistent" with the Global Investment Performance Standards, or similar statements, are prohibited.

...

HOw many years of performance should you AT MINIMUM have

5 years

If there is no record keeping policy, how long does CFA say you should hold things

7 years

When claiming GIPS compliance, a firm will least likely have to apply all of the required provisions in the first five major sections of the GIPS standards when investing in: separately managed accounts. equity mutual funds or unit trusts. commodity related portfolios.

A is correct. Certain provisions of Sections 0-5 do not apply to real estate investments, private equity investments and/or separately managed accounts. Private equity, real estate, and separately managed accounts have their own sections within the GIPS standards specific to each respective asset class (Sections 6-8).

. Which of the following statements regarding GIPS compliance is correct? Plan sponsors and consultants that manage assets can claim compliance with GIPS. Software that calculates performance in a manner consistent with the GIPS standards can claim compliance with GIPS. Investment management firms can comply with GIPS requirements by limiting their compliance claims to the standards they have chosen to follow

A is correct. Plan sponsors and consultants can make a claim of compliance if they actually manage assets for which they are making a claim of compliance. B is incorrect because software (and the vendors that supply software) cannot be GIPS compliant. Software can assist firms in achieving compliance with the GIPS standards, but only an investment management firm can claim compliance. C is incorrect because a firm has only two options regarding compliance with the GIPS standards: fully comply with all requirements of the GIPS standards and claim compliance through the use of the GIPS Compliance Statement; or not comply with all requirements of the GIPS standards and not claim compliance with, or make any reference to, the GIPS standards.

Why was GIPS created A. to ensure fair representation and full disclosure of investment performance B. To provide certainty into what is presented

A.

Smith, a research analyst with a brokerage firm, decides to change his recommendation for the common stock of Green Company, Inc., from a "buy" to a "sell." He mails this change in investment advice to all the firm's clients on Wednesday. The day after the mailing, a client calls with a buy order for 500 shares of Green Company. In this circumstance, Smith should: Accept the order. Advise the customer of the change in recommendation before accepting the order. Not accept the order because it is contrary to the firm's recommendation.

Advise the customer of the change in recommendation before accepting the order. Smith disseminated a change in the stock recommendation to his clients but then received a request contrary to that recommendation from a client who probably had not yet received the recommendation. Prior to executing the order, Smith should take additional steps to ensure that the customer has received the change of recommendation. Answer A is incorrect because the client placed the order prior to receiving the recommendation and, therefore, does not have the benefit of Smith's most recent recommendation.

Albert and Tye, who recently started their own investment advisory business, have registered to take the Level III CFA examination. Albert's business card reads, "Judy Albert, CFA Level II." Tye has not put anything about the CFA designation on his business card, but promotional material that he designed for the business describes the CFA requirements and indicates that Tye participates in the CFA Program and has completed Levels I and II. According to the Standards: Albert has violated the Standards, but Tye has not. Tye has violated the Standards, but Albert has not. Both Albert and Tye have violated the Standards.

Albert has violated the Standards, but Tye has not.

Carter works for Invest Today, a local asset management firm. A broker that provides Carter with proprietary research through client brokerage arrangements is offering a new trading service. The broker is offering low-fee, execution-only trades to complement its traditional full-service, execution-and-research trades. To entice Carter and other asset managers to send additional business its way, the broker will apply the commissions paid on the new service toward satisfying the brokerage commitment of the prior full-service arrangements. Carter has always been satisfied with the execution provided on the full-service trades, and the new low-fee trades are comparable to the fees of other brokers currently used for the accounts that prohibit soft dollar arrangements. Carter can trade for his accounts that prohibit soft dollar arrangements under the new low-fee trading scheme. Carter cannot use the new trading scheme because the commissions are prohibited by the soft dollar restrictions of the accounts. Carter should trade only through the new low-fee scheme and should increase his trading volume to meet his required commission commitment.

Answer A is correct. The question relates to Standard III(A)-Loyalty, Prudence, and Care. Carter believes the broker offers effective execution at a fee that is comparable with those of other brokers, so he is free to use the broker for all accounts. Answer B is incorrect because the accounts that prohibit soft dollar arrangements do not want to fund the purchase of research by Carter. The new trading scheme does not incur additional commissions from clients, so it would not go against the prohibitions. Answer C is incorrect because Carter should not incur unnecessary or excessive "churning" of the portfolios (excessive trading) for the purpose of meeting the brokerage commitments of soft dollar arrangements.

A former hedge fund manager, Jackman, has decided to launch a new private wealth management firm. From his prior experiences, he believes the new firm needs to achieve US$1 million in assets under management in the first year. Jackman offers a $10,000 incentive to any adviser who joins his firm with the minimum of $200,000 in committed investments. Jackman places notice of the opening on several industry web portals and career search sites. Which of the following is correct according to the Code and Standards? A member or candidate is eligible for the new position and incentive if he or she can arrange for enough current clients to switch to the new firm and if the member or candidate discloses the incentive fee. A member or candidate may not accept employment with the new firm because Jackman's incentive offer violates the Code and Standards. A member or candidate is not eligible for the new position unless he or she is currently unemployed because soliciting the clients of the member's or candidate's current employer is prohibited.

Answer C is correct. Standard IV(A)-Loyalty discusses activities permissible to members and candidates when they are leaving their current employer; soliciting clients is strictly prohibited. Thus, answer A is inconsistent with the Code and Standards even with the required disclosure. Answer B is incorrect because the offer does not directly violate the Code and Standards. There may be out-of-work members and candidates who can arrange the necessary commitments without violating the Code and Standards.

Chris Rodriguez, CFA, is a portfolio manager at Nisqually Asset Management, which specializes in trading highly illiquid shares. Rodriguez has been using Hon Securities Brokers almost exclusively when making transactions for Nisqually clients, as well as for his own relatively small account. Hon always executes Rodriguez's personal trades at a more preferential price than for Rodriguez's client's accounts. This occurs regardless of whether or not Rodriguez personally trades before or after clients. Rodriguez should least likely do which of the following in order to comply with the CFA Institute Code of Ethics and Standards of Professional Conduct? Eliminate the exclusive trading arrangement. Trade client accounts before his own account. Average trade prices across all trading accounts.

Average trade prices across all trading accounts.

Where does the duty lie in a pension plan ? A. management B. participants and benfeciaries

B

Praful Chandarana, CFA, is starting a new business to offer investment consulting services to pension fund trustees in response to a new regulation that requires all pension fund Investment Policy Statements (IPS) to be reviewed and approved by an independent CFA charterholder. Prior to starting the new business, he meets with the pension fund regulator to clarify if the CFA charterholder undertaking the IPS review should be a licensed financial advisor by the capital markets regulator. The capital markets regulator requires and grants licenses to those giving investment advice to clients. The pension regulator states that they do not require the CFA charterholder to hold a financial advisor's license, despite financial-related advice being given to the pension funds during any IPS review. Chandarana therefore starts his new business to undertake IPS reviews without obtaining a financial advisor's license from the capital markets regulator. Subsequently, when clients of his former employer contact him he informs them of his new company and the services he offers. Does Chandarana most likely violate the CFA Code and Standards? No. Yes, with regard to Professionalism. Yes, with regard to Duties to Employer.

B is correct because the CFA Code of Ethics requires Chandarana to uphold the rules governing financial advisors. However, he failed to do so in the absence of obtaining a financial advisor's license. The CFA Standard I(A)-Knowledge of the Law states that when rules or regulations are in conflict, members must comply with the more strict law, in this case the requirement for financial advisors to be licensed. Chandarana is not restricted from speaking with clients of his old employer by Duties to Employer Standard IV(A)-Loyalty.

Most societies would least likely consider ethical principles to include: justice. duplicity. diligence.

B is correct. Most societies acknowledge the ethical principles of honesty, fairness or justice, diligence, and respect for the rights of others. Duplicity or deception would be in violation of most ethical principles.

Based on the Conflicts of Interest standard, members and candidates must: disclose, as required by law, those conflicts interfering with their professional duties. disclose, as appropriate, any benefit paid to others for the recommendation of products. seek employer approval before prioritizing their investment transactions over those clients.

B is correct. The VI.C Referral Fees section of the Conflicts of Interest standard requires members and candidates to disclose to their employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from or paid to others for the recommendation of products or services.

A CFA Institute member would violate the standard for material nonpublic information by: conducting price distortion practices. inappropriately causing others to act. inadequately maintaining investment records.

B is correct. Under Standard II.A Material Nonpublic Information, members having material nonpublic information that could affect the value of an investment must not cause others to act on the information.

It is required for A. existing clients B. prospective clients to be shown a compliant piece

B. prospective clients

Q. Alexandra Smirnov, CFA, is a pension consultant to the Springwell Pension Fund. After reviewing Springwell's three-year performance presentation showing the fund's underperformance relative to its investment objectives and agreed benchmarks, Smirnov recommends that the fund hire new asset managers. Smirnov proposes that the fund hire Newday Managers on the basis of recent meetings she has had with the firm. Lengthy discussions at these meetings included Newday's investment strategy, its suitability to manage pension funds, its ability to adhere to its stated strategy, the firm's historical investment performance, and its adoption of the CFA Institute Code and Standards. Smirnov turned down Newday's offer of an introduction fee when recommending its services, but did not inform Springwell trustees of this offer. Which of the following CFA Institute Standards does Smirnov most likely violate? Referral Fees Loyalty, Prudence, and Care Diligence and Reasonable Basis

C is correct because Smirnov violated Standard V(A)-Diligence and Reasonable basis because she recommended an external advisor without first understanding the adviser's compliance and internal control procedures. She was correct in seeking to understand the proposed fund manager's code of ethics, quality of performance returns, and ability to adhere to its stated investment strategy, but to complete her work she also needed to perform due diligence about the firm's compliance and internal control procedures.

Gregor Pavlov, CFA, is a fund manager working for the general partner of a new private equity fund. Pavlov includes in the fund marketing material his performance history from his previous employer. He received permission from his former employer to take his historical recommendations and the supporting research reports he used to make those recommendations. Did Pavlov most likely violate the CFA Institute Standards? No Yes, with regard to Loyalty Yes, with regard to Record Retention

C is correct because even though Pavlov had his former employer's permission to take his performance record and supporting research reports with him, he does not have the underlying performance data to support those historical recommendations and is therefore most likely in violation of Standard V(C)-Record Retention. Pavlov had the permission of his employer to take his historical performance record and research reports with him when he left the firm so he is not in violation of Standard IV(A)-Loyalty.

What is most likely a critical aspect of the Consider phase of an ethical decision-making framework? Distinguishing duties to stakeholders Contemplating your decision Seeking additional guidance

C is correct. Seeking additional guidance in the Consider phase of the ethical decision-making framework is a critical step in viewing the situation from different perspectives. It is best to seek guidance from someone who is not affected by the same situational influences or behavioral biases to provide a fresh perspective. Additional guidance can be obtained from the firm's policies and procedures and the CFA Institute Code and Standards.

From the point of view of an investor, unethical behavior by investment professionals can most likely lead to which of the following? Increased willingness to accept risk Rise in the demand for investments Demand for a higher return

C is correct. Unethical behavior erodes and destroys trust. Investors with low levels of trust are less willing to accept risk and, therefore, will likely demand a higher return for the use of their capital. They may also choose to invest elsewhere or to not invest at all.

Who enforces code and standards?

CFA institute board of governors

Which of the following statements is a stated purpose of disclosure in Standard VI(C)-Referral Fees? Disclosure will allow the client to request discounted service fees. Disclosure will help the client evaluate any possible partiality shown in the recommendation of services. Disclosure means advising a prospective client about the referral arrangement once a formal client relationship has been established.

Disclosure will help the client evaluate any possible partiality shown in the recommendation of services.

Which of the following statements clearly conflicts with the recommended procedures for compliance presented in the CFA Institute Standards of Practice Handbook? Firms should disclose to clients the personal investing policies and procedures established for their employees. Prior approval must be obtained for the personal investment transactions of all employees. For confidentiality reasons, personal transactions and holdings should not be reported to employers unless mandated by regulatory organizations.

For confidentiality reasons, personal transactions and holdings should not be reported to employers unless mandated by regulatory organizations.

While waiting in the business class lounge before boarding an airplane, Becca Msafari, CFA, an equity analyst, overhears a conversation by a group of senior managers, including members of the Board, from a large publicly listed bank. The managers discuss staff changes necessary to accommodate their regional expansion plans. Msafari hears several staff names mentioned. Under what circumstances could Msafari most likely use this information when making an investment recommendation to her clients? Under no circumstances. If she does not breach the confidentiality of names of staff. If the discussed changes are unlikely to affect investor perception of the bank.

If the discussed changes are unlikely to affect investor perception of the bank.

Which of the following categories completely represents an ethical principle of CFA Institute as outlined in the Standards of Practice Handbook? Individual professionalism Responsibilities to clients and employers Ethics involved in investment analysis and recommendations

Individual professionalism

Justin Blake, CFA, a retired portfolio manager, owns 20,000 shares of a small public company that he would like to sell because he is worried about the company's prospects. He posts messages on several internet bulletin boards. The messages read, "This stock is going up once the pending patents are released, so now is the time to buy. The stock is a buy at anything below $3. I have done some close research on these guys." According to the Standards of Practice Handbook, Blake most likely violated the Standard or Standards associated with: Integrity of Capital Markets and Conflicts of Interest. Integrity of Capital Markets, but not Conflicts of Interest. Neither Integrity of Capital Markets nor Conflicts of Interest

Integrity of Capital Markets, but not Conflicts of Interest.

Jamison is a junior research analyst with Howard & Howard, a brokerage and investment banking firm. Howard & Howard's mergers and acquisitions department has represented the Britland Company in all of its acquisitions for the past 20 years. Two of Howard & Howard's senior officers are directors of various Britland subsidiaries. Jamison has been asked to write a research report on Britland. What is the best course of action for her to follow? Jamison may write the report but must refrain from expressing any opinions because of the special relationships between the two companies. Jamison should not write the report because the two Howard & Howard officers serve as directors for subsidiaries of Britland. Jamison may write the report if she discloses the special relationships with the company in the report.

Jamison may write the report if she discloses the special relationships with the company in the report.

Can you say you are a CFA candidate if you pass level 1

NO

Francesca Ndenda, CFA, and Grace Rutabingwa work in the same department for New Age Managers with Rutabingwa reporting to Ndenda. Ndenda learns that Rutabingwa received a Notice of Enquiry from the Professional Conduct Program at CFA Institute regarding a potential cheating violation when he sat for the CFA exam in June. As Rutabingwa's supervisor, Ndenda is afraid the behavior of Rutabingwa will be seen as a violation of the CFA Code and Standards. Does Ndenda most likely have cause for concern? Yes. No, because her responsibilities do not apply. No, not until Rutabingwa is found guilty of cheating.

No, because her responsibilities do not apply. because a supervisor's responsibilities relate to detecting and preventing violations by anyone subject to their supervision or authority regarding activities they supervise. Ndenda had no way of detecting and/or preventing Rutabingwa from cheating during the CFA exam, if in fact that is what he did, an event she did not attend.

Lawrence Hall, CFA, and Nancy Bishop, CFA, began a joint research report on Stamper Corporation. Bishop visited Stamper's corporate headquarters for several days and met with all company officers. Prior to the completion of the report, Bishop was reassigned to another project. Hall utilized his and Bishop's research to write the report but did not include Bishop's name on the report because he did not agree with and changed Bishop's conclusion included in the final report. According to the CFA Institute Standards of Practice Handbook, did Hall most likely violate any CFA Institute Standards of Professional Conduct? No. Yes, with respect to misrepresentation. Yes, with respect to diligence and reasonable basis.

No.

Oni Erobo, CFA, the General Partner in a real estate development project, is responsible for completing the project within an 18-month period and within budget. Erobo will receive an equity stake of 20% in the project if it comes within budget. Concerned that project costs could escalate, the Limited Partners require Erobo to cap expenses at 15% above budget. Costs were within expectation up until the last month of construction when imported lighting fixture costs (accounting for roughly 5% of total costs) escalated by more than 50%. As a result, the overall return declined below the partners expected 35% ROI. Erobo did not inform the Limited Partners about the increased costs. Did Erobo most likely violate the CFA Code of Ethics and Standards of Professional Conduct? No. Yes, because returns are lower than expected by the Partners. Yes, because he did not disclose the increased costs to his Partners.

No.

Jurgen is a portfolio manager. One of her firm's clients has told Jurgen that he will compensate her beyond the compensation provided by her firm on the basis of the capital appreciation of his portfolio each year. Jurgen should: Turn down the additional compensation because it will result in conflicts with the interests of other clients' accounts. Turn down the additional compensation because it will create undue pressure on her to achieve strong short-term performance. Obtain permission from her employer prior to accepting the compensation arrangement

Obtain permission from her employer prior to accepting the compensation arrangement

Paper was recently terminated as one of a team of five managers of an equity fund. The fund had two value-focused managers and terminated one of them to reduce costs. In a letter sent to prospective employers, Paper presents, with written permission of the firm, the performance history of the fund to demonstrate his past success. Paper did not violate the Code and Standards. Paper violated the Code and Standards by claiming the performance of the entire fund as his own. Paper violated the Code and Standards by including the historical results of his prior employer.

Paper violated the Code and Standards by claiming the performance of the entire fund as his own. the statement didn't say he was apart of a team of managers!

Pietro, president of Local Bank, has hired the bank's market maker, Vogt, to seek a merger partner. Local is currently not listed on a stock exchange and has not reported that it is seeking strategic alternatives. Vogt has discussed the possibility of a merger with several firms, but they have all decided to wait until after the next period's financial data are available. The potential buyers believe the results will be worse than the results of prior periods and will allow them to pay less for Local Bank. Q. Pietro wants to increase the likelihood of structuring a merger deal quickly. Which of the following actions would most likely be a violation of the Code and Standards? Pietro could instruct Local Bank to issue a press release announcing that it has retained Vogt to find a merger partner. Pietro could place a buy order for 2,000 shares (or four times the average weekly volume) through Vogt for his personal account. After confirming with Local's chief financial officer, Pietro could instruct Local to issue a press release reaffirming the firm's prior announced earnings guidance for the full fiscal year.

Pietro could place a buy order for 2,000 shares (or four times the average weekly volume) through Vogt for his personal account.

Who most likely determines whether a violation of the CFA Institute Code and Standards or testing policies has occurred and what sanction should be imposed? The: Professional Conduct Staff and the Disciplinary Review Committee Professional Conduct Staff Disciplinary Review Committee

Professional Conduct Staff and the Disciplinary Review Committee

Firms claiming GIPS compliance must make every reasonable effort to provide a compliant presentation to which of the following? Existing clients Prospective clients Both existing and prospective clients

Prospective clients

Meshack Bradovic, CFA, was recently hired as a credit analyst at a credit rating agency whose major clients include publicly listed companies on the local stock exchange. One of the clients is currently preparing to issue a new bond to finance a major factory project. Analysts are speculating that without the new factory the company will not survive the onslaught of competition from increasing imports; therefore, the company is counting on an upgraded credit rating to enhance the subscription level of the issue. Bradovic's research suggests that the creditworthiness of the company has severely deteriorated over the last year due to negative operating cash flows. Without conducting extensive research, Bradovic's boss puts pressure on him to upgrade the credit rating to an investment grade rating. Bradovic reports this to the firm's compliance department where he is encouraged to follow his boss's advice. What course of action is most appropriate for Bradovic to prevent any violation of the CFA Institute Code or Standards? Quit his position with the firm Upgrade the rating but note his objections in writing Disassociate with the credit rating report, the bond issue and the clien

Quit his position with the firm

T/F Rule II(B) isn't saying you can't exploit market inefficiencies, its just saying it is all about INTENT

TRUE

T/F you can tell a client his portfolio is GIPS compliant... you CANT say that others or composites are GIPS compliant

TRUE

Which statement about a manager's use of client brokerage commissions violates the Code and Standards? A client may direct a manager to use that client's brokerage commissions to purchase goods and services for that client. Client brokerage commissions should be used to benefit the client and should be commensurate with the value of the brokerage and research services received. Client brokerage commissions may be directed to pay for the investment manager's operating expenses.

The correct answer is C. This question involves Standard III(A)-Loyalty, Prudence, and Care and the specific topic of soft dollars or soft commissions. Answer C is the correct choice because client brokerage commissions may not be directed to pay for the investment manager's operating expenses. Answer B describes how members and candidates should determine how to use brokerage commissions—that is, if the use is in the best interests of clients and is commensurate with the value of the services provided. Answer A describes a practice that is commonly referred to as "directed brokerage." Because brokerage is an asset of the client and is used to benefit the client, not the manager, such practice does not violate a duty of loyalty to the client. Members and candidates are obligated in all situations to disclose to clients their practices in the use of client brokerage commissions.

Which of the following statements concerning the requirements of GIPS Fundamentals of Compliance is correct? Firms claiming compliance have full discretion over the dissemination of their compliant presentation. Firms may claim partial compliance with the standards provided the performance presented is not false or misleading. The definition of the firm creates defined boundaries whereby total firm assets and the basis for firm-wide compliance are determined

The definition of the firm creates defined boundaries whereby total firm assets and the basis for firm-wide compliance are determined A is wrong because you don't have full discretion. You have to make a reasonable effort to provide a presentation to all prospective clients

Townsend was recently appointed to the board of directors of a youth golf program that is the local chapter of a national not-for-profit organization. The program is beginning a new fund-raising campaign to expand the number of annual scholarships it provides. Townsend believes many of her clients make annual donations to charity. The next week in her regular newsletter to all clients, she includes a small section discussing the fund-raising campaign and her position on the organization's board. Townsend did not violate the Code and Standards. Townsend violated the Code and Standards by soliciting donations from her clients through the newsletter. Townsend violated the Code and Standards by not getting approval of the organization before soliciting her clients.

Townsend did not violate the Code and Standards. Answer A is correct. Townsend has not provided any information about her clients to the leaders or managers of the golf program; thus, she has not violated Standard III(E)-Preservation of Confidentiality. Providing contact information about her clients for a direct-mail solicitation would have been a violation. Answer B is incorrect because the notice in the newsletter does not violate Standard III(E). Answer C is incorrect because the golf program's fund-raising campaign had already begun, so discussing the opportunity to donate was appropriate.

If a client is outside the normal fee structure can you do things like not allocate them positions?

Yes

Marc Davidson, CFA, works as a trust specialist for Integrity Financial. On his own time, Davidson starts a part time consulting business providing advice to Trustees for a fee. Since this is only part time work, he doesn't inform Integrity of the consulting business. Davidson asks his assistant to compile a list of Integrity's clients and their contact information. The following month, Davidson is offered a similar role at Integrity's largest competitor, Legacy Trust Services, Inc. After he begins working at Legacy, his new manager arranges for him to meet with a number of prospective clients, many of whom are clients of Integrity. After meeting with Davidson, a number of former Integrity clients decide to transfer their business to Legacy. Did Davidson's action violate the Code and Standards? No. Yes, Davidson's part time consulting business is a violation of the Standards. Yes, both Davidson's part time consulting business and his meetings with Integrity clients are a violation of the Standards.

Yes, Davidson's part time consulting business is a violation of the Standards. C isn't right because his company sets up the meeting

Can you base a recommendation on future events??

Yes, even if they are uncertain like governments passing laws

Teresa Avila, CFA, is a micro cap investment analyst at a hedge fund. The fund requires Avila to hold any securities she recommends for the fund in her own account as well. Because Avila has such a small account, whenever she trades for her own portfolio she combines the transactions with those of the hedge fund so she is sure to have her account aligned with the fund. Has Avila most likely violated any CFA Institute Standards of Professional Conduct? No. Yes, related to Misconduct. Yes, related to Priority of Transactions.

Yes, related to Priority of Transactions.

Charlie Mancini, CFA, is the Managing Director for Business Development at SV Financial (SVF), a large US-based mutual fund organization. Mancini has been under pressure recently to increase revenues. In order to secure business from a large hedge fund manager based in Asia, Mancini recently approved flexible terms for the fund's client agreement. To allow for time zone differences, the agreement permits the hedge fund to trade in all of SVF's mutual funds six hours after the close of US markets, which is prohibited by US regulators. Did Mancini violate any CFA Institute Standards of Professional Conduct? No. Yes, with regard to Fair Dealing. Yes, with regard to Fair Dealing and Material Nonpublic Information.

Yes, with regard to Fair Dealing and Material Nonpublic Information.

If two analysts are working on a report and there is a disagreement, what can you do?

You can take the disagreeing person off the report

As stated in the revised 11th edition, the Standards of Professional Conduct: require supervisors to focus on the detection and prevention of violations. adopt separate ethical considerations for programs such as CIPM and Investment Foundations. address the risks and limitations of recommendations being made to clients.

address the risks and limitations of recommendations being made to clients.

If a company asks you to come visit a plant or something, who should pay for that

always the analyst

Single most important factor in promoting ethical behavior

developing and maintaining a culture of integrity

The Investment Analysis, Recommendations, and Actions standard states that members and candidates must: find an investment suitable for their client before making a recommendation. make reasonable efforts to ensure that performance presentation is fair, accurate, and complete. distinguish between fact and opinion in the presentation of investment analysis and recommendations.

distinguish between fact and opinion in the presentation of investment analysis and recommendations.

According the GIPS standards, for periods beginning on or after 1 January 2011, the aggregate fair value of total firm assets most likely includes all: fee-paying discretionary accounts. fee- and non-fee-paying discretionary accounts. fee- and non-fee-paying discretionary and non-discretionary accounts.

fee- and non-fee-paying discretionary and non-discretionary accounts.

If GIPS and local law conflict, which do you choose

go with law BUT disclose the conflict

An ethical decision-making framework will most likely: include a pre-determined, uniform sequence. focus exclusively on confirmable facts and relationships. help avoid a decision that has unanticipated ethical consequences.

help avoid a decision that has unanticipated ethical consequences Using an ethical decision-making framework consistently will help you develop sound judgment and decision-making skills and avoid making decisions that have unanticipated ethical consequences. The decision-making process is often iterative, and the decision maker may move between phases of the framework. A decision maker should consider more than confirmable facts and relationships; for example, the decision maker should consider situational influences and personal biases.

According to the Fundamentals of Compliance—Requirements section of the GIPS standards, a firm must: include in total firm assets those assigned to a sub-advisor selected by the firm. alter historical composite performance after a significant change in the firm's organization occurs. represent that the calculation methodology used by the firm is "in accordance with the Global Investment Performance Standards" when presenting performance.

include in total firm assets those assigned to a sub-advisor selected by the firm.

Information based manipulation vs transaction based manipulation

information based - spreading false ruors to induce trading (like pumping and dumping) transaction based - securing a dominant position in attempt to exploit or manipulate the price (it effects price and volume)

To maintain trust, the investment management profession must be interdependent with: regulators. employers. investment firms.

investment firms. The investment management profession and investment firms must be interdependent to maintain trust. Employers and regulators have their own standards and practices, which may differ from regulations and standards set by professional bodies.

Difference between the old code of ethics and new code of ethics

it was to promote the integreity and uphold the rules governing capital markets but changed to to promote the integrity and viability of global capital markets for the ultimate benefit of society

According to the GIPS standards, in cases where country-specific regulations conflict with GIPS, firms must follow: GIPS standards only. local laws only. local laws and disclose the nature of the conflict with GIPS

local laws and disclose the nature of the conflict with GIPS

Situational influences in decision making will most likely be minimized if: strong compliance programs are in place. longer-term consequences are considered. individuals believe they are truthful and honest.

longer-term consequences are considered.

A profession is most likely described as a group of people that: has a common level of basic knowledge about a particular subject. monitors its members based on an agreed-on code of ethics. puts the interests of its members first.

monitors its members based on an agreed-on code of ethics.

An analyst works for company A, then he registers for a new company to compete with company A. Is this violating Standard IV(A): loyalty to employer?

no as long as the analyst did it on his own time and doesnt start contacting clients

Which of the following is most likely found in the CFA Institute Standards of Professional Conduct, Standard I-Professionalism? Members and candidates must: not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence. place the integrity of the investment profession and the interest of clients above their own interest. maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.

not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence. B&C are in code of ethics

Decision makers who use a compliance approach are most likely to: avoid situational influences. oversimplify decision making. consider more factors than when using an ethical decision-making approach.

oversimplify decision making.

According to the Code of Ethics, members of CFA Institute and candidates for the CFA designation must: maintain their professional competence to exercise independent professional judgment. place the integrity of the investment profession and the interests of clients above their own personal interests. practice in a professional and ethical manner with the public, clients, and others in the global capital markets

place the integrity of the investment profession and the interests of clients above their own personal interests.

Each composite of a GIPS-compliant firm must consist of: multiple portfolios. portfolios selected on an ex post basis. portfolios managed according to a similar investment strategy.

portfolios managed according to a similar investment strategy.

Fiduciary duty is a standard most likely to be upheld by members of a(n): employer. profession. not-for-profit body.

profession.

Which of the following statements related to why the GIPS standards were created is least likely correct? GIPS standards were created to: provide clients certainty in what is presented and allow them to make reasonable comparisons. identify a set of ethical principles for firms to follow in calculating and presenting historical investment results. establish a standardized, industry wide approach for investment firms to follow.

provide clients certainty in what is presented and allow them to make reasonable comparisons.

According to the Fundamentals of Compliance section of the Global Investment Performance Standards, issues that a firm must consider when claiming compliance include all of the following except: replicating performance. properly defining the firm. documenting firm policies and procedures used in establishing and maintaining compliance with the Standards.

replicating performance.

Wang Dazong, CFA, is a sole proprietor investment advisor. Dazong believes in putting his money at risk along with his clients and trades the same securities as his clients. In order to ensure fair treatment of all accounts, he rotates trade allocations so that each account has an equal likelihood of receiving a fill on their orders. This allocation procedure also applies to Dazong's own account. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, the allocation procedure used by Dazong: complies with the Standards. requires revision to ensure client trades take precedence. should be disclosed and written approval received from clients

requires revision to ensure client trades take precedence.

What is more important? Standard III(A): Loyalty, prudence, care OR fidicuciary duty

standard III A

Benchmarks for minimally acceptable behaviors of community members are: a code of ethics. laws and regulations. standards of conduct.

standards of conduct.

Molly Burnett, CFA, is a portfolio manager for a fund that only invests in environmentally friendly companies. A multinational utility company recently acquired one of the fund's best performing investments, a wind power company. The wind power company's shareholders received utility company shares as part of the merger agreement. The utility has one of the worst environmental records in the industry, but its shares have been one of the top performers over the past 12 months. Because the utility pays a high dividend every three months, Burnett holds the utility shares until the remaining two dividends are paid for the year then sells the shares. Burnett most likely violated the CFA Institute Standard of Professional Conduct concerning: suitability. disclosure of conflicts. independence and objectivity.

suitability.

CFA mission

to lead responsibility and professionalism in the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society

Can you buy or sell securities that go against the firms public recommendations?

yes

Can you save work on a home computer

yes

If you are freelancing and start a research report for company A.... then get hired by company B. Who gets that report ?

you should finish it for company A and give it to them.