CFA Level 1 CFAI Exam I (AM) || With All Accurate Questions & Solutions (Rated A+)
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Module
CFA - Chartered Financial Analyst
Institution
CFA - Chartered Financial Analyst
CFA Level 1 CFAI Exam I (AM) || With All Accurate Questions & Solutions (Rated A+)
CFA Level 1 CFAI Exam I (AM) || With All Accurate Questions & Solutions (Rated A+)
Why a large difference between two previous TWR and MWR returns? TW RoR = 15.84%, while MW RoR = 13.86%.
Preference generally...
, CFA Level 1 CFAI Exam I (AM) || With
All Accurate Questions & Solutions
(Rated A+)
Can you initiate coverage on a company that is a potential client? - ANSWER - Yes -
as long as the recommendation is not unjustifiably favorable
Ethics:
The ______________ of the CFA BoD has overall the Professional Conduct
Program and enforcement of the Code and Standards
Several circumstances can prompt an inquiry from the ________________ (through
the Professional Conduct staff), such as: (4 things).
The Officer may decide one of 3 decides upon investigation. - ANSWER -
Disciplinary Review Committee
CFA Institute Designated Officer
*SWPP*
-*Self* Disclosure by members / candidates on their professional Conduct
Statements of involvement in a civil / criminal complaint.
-*Written* Complaints about a member or candidate's professional conduct received
by the staff
-Evidence of misconduct received through *public* sources (media)
-CFA exam *proctor* report of a violation
i) that no disciplinary sanctions are appropriate,
ii) to issue a cautionary letter, or
iii) to discipline the member or candidate
Code of Ethics - 6 pillars - ANSWER - *A PUPPI*
■ *Act* with integrity, competence, diligence, respect, and in an ethical manner with
the public, clients, prospective clients, employers, employees, colleagues in the
investment profession, and other participants in the global capital markets.
■ *Place* the integrity of the investment profession and the interests of clients above
their own personal interests.
■ *Use* reasonable care and exercise independent professional judgment when
conducting investment analysis, making investment recommendations, taking
investment actions, and engaging in other professional activities.
■ *Practice* and encourage others to practice in a professional and ethical manner
that will reflect credit on themselves and the profession.
■ *Promote* the integrity of and uphold the rules governing capital markets.
,■ Maintain and *improve* their professional competence and strive to maintain and
improve the competence of other investment professionals.
Standards of Professional Conduct - ANSWER - *PC DESIRE*
- *P*rofessionalism.
- Integrity of *C*apital Markets.
- *D*uties to Clients.
- Duties to *E*mployers.
- Investment Analysi*S*, Recommendations, and Action.
- Conflicts of *I*nterest.
- *Re*sponsibilities as a CFA Institute Member or CFA Candidate.
*P*rofessionalism. - ANSWER - *KIMM*el
a. Knowledge of the Law / Code. Members understand and comply with all laws -
KVIOA
i. Know laws in *all countries* in which they trade securities.
ii. Responsible for violations in which they *knowingly* participate.
iii. If *illegal* actions of client, customer or personal Code Violation - Must dissociate.
iv. If violation of Code by fellow member - strongly encourage to report. No
requirement to report unless law.
v. When going with the 'applicable law' - Code vs country of residence vs. country of
business... go with the strictest! But if 'law of locality' is stated, then go with that. (Ie.
Member resides in MS (more strict than Code) country, does business in LS (less
strict than Code) country; MS law applies, but can state that law of locality where
business is conducted governs.) Member must adhere to the Code and Standards.
Not the MS laws.
b. Independence and Objectivity. (GSBPT)
i. Modest gifts and entertainment are acceptable. Must be disclosed. If from client,
must be disclosed to employer (if contingent of future perform.. see ACA need
consent too)
ii. Sell side analysts. Need effective firewalls bw investment banking. No buy side
influence allowed (if they have position in the security and try to convince you to
issue favorable report).
iii. Fund Manager Relationships (Secondary Fund Managers giving gifts for hiring,
etc)
iv. Public Companies - can't engage in retaliatory practices by restricting access to
managers / conference calls, etc...
v. Travel Funding - use commercial travel options when talking to executives, unless
have to use charter
c. Misrepresentation.
i. Investing through outside managers - must disclose their intended use of external
managers and must not represent those managers' investment practices as their
own.
, ii. Guarantees are misleading bc there is some risk.
Integrity of Capital Markets - ANSWER - *M&M*
a. Material Nonpublic Information - illegal - all rest is good. Have to wait a little bit
until trading. **** ONLY APPLIES TO NON-PUBLIC INFO ABOUT THE ISSUER (ie
analyst that is influential can trade on own name). **** failing to prevent transfer of
info is a violation.
i. Mosiac Theory - analysts get their information from a wide variety of sources -
public / non-public.
b. Market Manipulation
i. No Spreading false rumors. No non-fact based report during quiet period.
ii. Transaction-Based Manipulation. Trading a position between intercompany
positions to create the illusion of a price rise.
Duties to Clients - ANSWER - *PRoSPECt*
a. Loyalty, *P*rudence, and Care.
i. Follow IMAs / Govering Docs. COST BENEFIT FOR VOTING PROXIES. ALSO
VOTE IN BEST INTEREST FOR BENEFICIARIES NOT SPONSOR
ii. Recommend submitting at least quarterly statement.
iii. Disclose conflicts of interest - ie you use a broker that pays your utility bill in
exchange for using them.
b. Fai*R* Dealing
i. Not necessary equal treatment of clients but should not advantage / disadvantage
any clients against another client. Make premium levels of service available. MUST
DISTRIBUTE 'HOT' SHARES ON A WEIGHTED / PRO RATA BASIS.
ii. Investment Recommendations - Advise clients of changes in recommendations.
Shorten timeframe from decision to dissemination. IF ORDER COMES IN INFORM
THAT CHANGE MADE EVEN IF IT IS BEFORE OTHERS.. IE MAILED OUT.
iii. No participation in OVERSUBSCRIBED equity IPO
c. *S*uitability
i. Reasonable inquiry into client's investment experience.
ii. Determine that an investment is suitable to the client's financial situation / context
of the client's total portfolio. UPDATE INFO REGULARLY. IF EXECUTING
UNSUITABLE INV. FOR CLIENT, GET AFFIRMATIVE STATEMENT
iii. Management capacity - make sure investments made in line with objectives /
constraints.
d. *Pe*rformance Presentation - *Past misleading gross terminator eliminated*
i. No misleading *performance* indicators. Should not indicate the ability to achieve a
ROR similar to that achieved in the *past*. Brief presentations - indicate that the
presentations have offered *limited* information.
ii. Include all *terminated* accounts in performance. Include disclosures (*gross of
fee*s).
e. *C*onfidentiality: Unless
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