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CFA - Ethical and Professional Standards| Questions with 100% Verified Answers
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CFA - Ethical and ProfessionalStandards| Questions with 100%
Verified Answers
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
,Brown works for an investment counseling firm. Green, a new client of the firm, is
meeting with Brown for the first time. Green used another counseling firm
for financial
advice for years, but she has switched her account to Brown's firm. After spending
a few
minutes getting acquainted, Brown explains to Green that she has discovered
a highly
undervalued stock that offers large potential gains. She recommends that Green
purchase
the stock. Brown has committed a violation of the Standards. What should
she have done
differently?
A. Brown should have determined Green's needs, objectives, and tolerance
for risk
before making a recommendation of any type of security.
B. Brown should have thoroughly explained the characteristics of the company to
Green, including the characteristics of the industry in which the company
operates.
C. Brown should have explained her qualifications, including her
education, training,
and exper - ✔ ✔ a
Grey recommends the purchase of a mutual fund that invests solely in long-term
US
Treasury bonds. He makes the following statements to his clients:
I. "The payment of the bonds is guaranteed by the US government; therefore, the
default risk of the bonds is virtually zero."
,II. "If you invest in the mutual fund, you will earn a 10% rate of return each
year for
the next several years based on historical performance of the market."
Did Grey's statements violate the CFA Institute Code and Standards?
A. Neither statement violated the Code and Standards. B. Only
statement I violated the Code and Standards.
C. Only statement II violated the Code and Standards. - ✔ ✔ c
Anderb, a portfolio manager for XYZ Investment Management Company—
a registered
investment organization that advises investment firms and private accounts—was
promoted to that position three years ago. Bates, her supervisor, is responsible
for
reviewing Anderb's portfolio account transactions and her required
monthly reports of
personal stock transactions. Anderb has been using Jonelli, a broker, almost
exclusively
for brokerage transactions for the portfolio account. For securities in which
Jonelli's firm
makes a market, Jonelli has been giving Anderb lower prices for personal
purchases and
higher prices for personal sales than Jonelli gives to Anderb's portfolio
accounts and
other investors. Anderb has been filing monthly reports with Bates only for
those months
, in which she has no personal transactions, which is about every fourth
month. Which of
the following is most likely to be a violation of the Code and Standa - ✔ ✔ a
Which of the following is a correct statement of a member's or candidate's duty
under the
Code and Standards?
A. In the absence of specific applicable law or other regulatory requirements,
the Code
and Standards govern the member's or candidate's actions.
B. A member or candidate is required to comply only with applicable local laws,
rules, regulations, or customs, even though the Code and Standards may impose
a higher degree of responsibility or a higher duty on the member or candidate. C.
A member or candidate who trades securities in a securities market where no
applicable local laws or stock exchange rules regulate the use of material
nonpublic
information may take investment action based on material
nonpublic information. - ✔ ✔ a
Ward is scheduled to visit the corporate headquarters of Evans Industries.
Ward expects
to use the information he obtains there to complete his research report on Evans
stock.
Ward learns that Evans plans to pay all of Ward's expenses for the trip,
including costs of
meals, hotel room, and air transportation. Which of the following actions would
be the
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