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CFA - Ethical and Professional Standards| Questions with 100% Verified Answers
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CFA - Ethical and Professional Standards|Questions with 100% Verified Answers
An investment management firm has been hired by ETV Corporation to work on
an
additional public offering for the company. The firm's brokerage unit now has a
"sell"
recommendation on ETV, but the head of the investment banking department has
asked
the head of the brokerage unit to change the recommendation from "sell" to
"buy."
According to the Standards, the head of the brokerage unit would be permitted
to:
A. Increase the recommendation by no more than one increment (in this case, to
a
"hold" recommendation).
B. Place the company on a restricted list and give only factual information about
the
company.
C. Assign a new analyst to decide if the stock deserves a higher rating. - ✔️✔️b
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:
A. Albert has violated the Standards, but Tye has not.
B. Tye has violated the Standards, but Albert has not.
C. Both Albert and Tye have violated the Standards. - ✔️✔️a
Scott works for a regional brokerage firm. He estimates that Walkton Industries
will
increase its dividend by US$1.50 a share during the next year. He realizes that this
increase is contingent on pending legislation that would, if enacted, give Walkton
a
substantial tax break. The US representative for Walkton's home district has told
Scott
that, although she is lobbying hard for the bill and prospects for its passage are
favorable,
concern of the US Congress over the federal deficit could cause the tax bill to be
voted
down. Walkton Industries has not made any statements about a change in
dividend
policy. Scott writes in his research report, "We expect Walkton's stock price to
rise by at
least US$8.00 a share by the end of the year because the dividend will increase by
US$1.50 a share. Investors buying the stock at the current time should expect to
realize a
total return of at least 15% on the stock." According to t - ✔️✔️b
,Which one of the following actions will help to ensure the fair treatment of
brokerage
firm clients when a new investment recommendation is made?
A. Informing all people in the firm in advance that a recommendation is to be
disseminated.
B. Distributing recommendations to institutional clients prior to individual
accounts.
C. Minimizing the time between the decision and the dissemination of a
recommendation. - ✔️✔️c
The mosaic theory holds that an analyst:
A. Violates the Code and Standards if the analyst fails to have knowledge of and
comply with applicable laws.
B. Can use material public information and nonmaterial nonpublic information in
the
analyst's analysis.
C. Should use all available and relevant information in support of an investment
recommendation. - ✔️✔️b
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:
A. Turn down the additional compensation because it will result in conflicts with
the
interests of other clients' accounts.
, B. Turn down the additional compensation because it will create undue pressure
on
her to achieve strong short-term performance.
C. Obtain permission from her employer prior to accepting the compensation
arrangement. - ✔️✔️c
One of the discretionary accounts managed by Farnsworth is the Jones
Corporation
employee profit-sharing plan. Jones, the company president, recently asked
Farnsworth to
vote the shares in the profit-sharing plan in favor of the slate of directors
nominated by
Jones Corporation and against the directors sponsored by a dissident stockholder
group.
Farnsworth does not want to lose this account because he directs all the
account's trades
to a brokerage firm that provides Farnsworth with useful information about tax-
free
investments. Although this information is not of value in managing the Jones
Corporation
account, it does help in managing several other accounts. The brokerage firm
providing
this information also offers the lowest commissions for trades and provides best
execution. Farnsworth investigates the director issue, concludes that the
managementnominated
slate is better for the long-run performance of the comp - ✔️✔️b
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