Exam (elaborations)
CAIA LEVEL 1 QUESTIONS AND ANSWERS
- Course
- Institution
CAIA LEVEL 1 QUESTIONS AND ANSWERS
[Show more]
Content preview
CAIA LEVEL 1 QUESTIONS ANDANSWERS
Standard I(A) - Knowledge of Law - Answer-Understand and comply with all applicable
laws, rules and regulations (including the CFA institutes code) of any government,
regulatory organization, licensing agency, or professional association governing their
professional activities. In the event of a conflict, comply with the more strict law, rule or
regulation. Must not knowingly participate or assist in and must disassociate from any
violation of such laws, rules or regulations
Standard I(B)- Independence and Objectivity - Answer-Use reasonable care and
judgement to achieve and maintain independence and objectivity in their professional
activities. Must not offer, solicit, or accept any gifts, benefit, compensation or
consideration that reasonably could be expected to compromise their own or another
independence and objectivity
Standard I(C)- Misrepresentations - Answer-Must not knowingly make any
misrepresentations relating to investment analysis, recommendations actions or other
professional activities
Standard I(D) Misconduct - Answer-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
Standard II: Integrity of Capital Markets - Answer-A. Material Nonpublic Information
B. Market Manipulation
Standard I: Professionalism - Answer-A. Knowledge of the Law
B. Independence and Objectivity
C. Misrepresentation
D. Misconduct
Standard II(A) Material Nonpublic Information - Answer-Members and Candidates who
possess material nonpublic information that could affect the value of an investment
must not act or cause others to act on the information.
Standard II B - Market Manipulation - Answer-Members must not engage in practices
that distort prices or artificially inflate volume with the intent to mislead market
participants
Standard III: Duties to Clients - Answer-A. Loyalty, Prudence, and Care
B. Fair Dealing
C. Suitability
D. Performance Presentation
,E. Preservation of Confidentiality
Standard III(A) - Loyalty, Prudence, and Care - Answer-Members and Candidates have
a duty of loyalty to their clients and must act with reasonable care and exercise prudent
judgment. Members and Candidates must act for the benefit of their clients and place
their clients' interests before their employer's or their own interests.
Standard III(B) Fair Dealing - Answer-Members and Candidates must deal fairly and
objectively with all clients when providing investment analysis, making investment
recommendations, taking investment action, or engaging in other professional activities.
Standard III(C) Suitability - Answer-When Members and Candidates are in an advisory
relationship with a client, they must:
Make a reasonable inquiry into a client's or prospective client's investment experience,
risk and return objectives, and financial constraints prior to making any investment
recommendation or taking investment action and must reassess and update this
information regularly.
Determine that an investment is suitable to the client's financial situation and consistent
with the client's written objectives, mandates, and constraints before making an
investment recommendation or taking investment action.
Judge the suitability of investments in the context of the client's total portfolio.
When Members and Candidates are responsible for managing a portfolio to a specific
mandate, strategy, or style, they must make only investment recommendations or take
only investment actions that are consistent with the stated objectives and constraints of
the portfolio.
Standard III(D) Performance Presentation - Answer-When communicating investment
performance information, Members and Candidates must make reasonable efforts to
ensure that it is fair, accurate, and complete.
Standard III(E) Preservation of Confidentiality - Answer-Members and Candidates must
keep information about current, former, and prospective clients confidential unless:
The information concerns illegal activities on the part of the client;
Disclosure is required by law; or
The client or prospective client permits disclosure of the information.
Standard IV: Duties to Employers - Answer-A. Loyalty
B. Additional Compensation Arrangements
C. Responsibilities of Supervisors
,Standard IV(A) Loyalty - Answer-In matters related to their employment, Members and
Candidates must act for the benefit of their employer and not deprive their employer of
the advantage of their skills and abilities, divulge confidential information, or otherwise
cause harm to their employer.
Standard IV(B) Additional Compensation Arrangements - Answer-Members and
Candidates must not accept gifts, benefits, compensation or consideration that
competes with, or might reasonably be expected to create a conflict of interest with their
employers unless they obtain written consent from all parties involved.
Standard IV(C) Responsibilities of Supervisors - Answer-Members and Candidates
must make reasonable efforts to ensure that anyone subject to their supervision or
authority complies with applicable laws, rules, regulations, and the Code and Standards.
Standard V: Investment Analysis, Recommendations, and Actions - Answer-A.
Diligence and Reasonable Basis
B. Communication with Clients and prospective clients
C. Record Retention
Standard V(A) - Diligence and Reasonable Basis - Answer-Members and Candidates
must:
1. Exercise diligence, independence, and thoroughness in analyzing investments,
making investment recommendations, and taking investment actions.
2. Have a reasonable and adequate basis, supported by appropriate research and
investigation, for any investment analysis, recommendation, or action.
Standard V(B) - Communication with Clients and Prospective Clients - Answer-
Members and candidates must:
1. Disclose to clients and prospective clients the basic format and general principles of
the investment process used to analyze investments, select securities, and construct
portfolios and must promptly disclose any changes that might materially affect those
processes
2. Disclose to clients and prospective clients significant limitations and risks accounted
with the investment process
3. Use reasonable judgement to identify with factors are important to their investment
analyses, recommendations, or actions and include those factors in communications
with clients and prospective clients
4. Distinguish between fact and opinion in the presentation of investment analyses and
recommendations
Standard V(C) Record Retention - Answer-Members and Candidates must develop and
maintain appropriate records to support their investment analyses, recommendations,
actions, and other investment-related communications with clients and prospective
clients.
, Standard VI: Conflicts of Interest - Answer-A. Disclosure of Conflicts
B. Priority of Transactions
C. Referral Fees
Standard VI(A) - Disclosure of Conflicts - Answer-Members and Candidates must make
full and fair disclosure of all matters that could reasonably be expected to impair their
independence and objectivity or interfere with respective duties to their clients,
prospective clients, and employer. Members and Candidates must ensure that such
disclosures are prominent, are delivered in plain language, and communicate the
relevant information effectively.
Standard VI(B) - Priority of Transactions - Answer-Investment transactions for clients
and employers must have priority over investment transactions in which a Member or
Candidate is the beneficial owner.
Standard VI(C) Referral Fees - Answer-Members and Candidates must 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.
Traditional Investments - Answer-include publicly traded equities, fixed-income
securities, and cash
Real Assets - Answer-associated with investments that directly control non-financial
assets and represent actual rights to consumption rather than financial claims to cash
flows generated by the tangible and intangible assets of a firm. Examples:
1. Real Estate (land and permanent improvements to the land; land- raw land,
timberland and farmland)
2. Infrastructure investments (investments represent claims on the cash flows generated
by the assets)
3. intellectual property
4. Natural Resources
5. Commodities
Hedge Funds - Answer-Private investment vehicles that typically use leverage,
derivatives, and long and short investment strategies. Minimal regulatory restrictions.
Private Equity - Answer-Includes both debt and equity securities that are not publicly
traded. Examples:
1. Venture Capital
2. LBOs
3. Mezz debt
4. Distressed Debt
Structured Products - Answer-segment the cash flows of traditional investments or link
the product's returns to one or more market values in order to achieve certain risk
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller biggdreamer. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $19.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
78637 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now