Standard I(A) Professionalism: Knowledge of the Law - answer✔Michael Allen works for a
brokerage firm and is responsible for an underwriting of
securities. A company official gives Allen information indicating that the financial
statements Allen filed with the regulator overstate the issuer's earnings. Allen seeks
the advice of the brokerage firm's general counsel, who states that it would be difficult
for the regulator to prove that Allen has been involved in any wrongdoing.
Standard I(A) Professionalism: Knowledge of the Law - answer✔Lawrence Brown's employer, an
investment banking firm, is the principal underwriter
for an issue of convertible debentures by the Courtney Company. Brown discovers
that the Courtney Company has concealed severe third- quarter losses in its foreign
operations. The preliminary prospectus has already been distributed.
Standard I(B) Professionalism: Independence and Objectivity - answer✔Steven Taylor, a mining
analyst with Bronson Brokers, is invited by Precision Metals
to join a group of his peers in a tour of mining facilities in several western US states.
The company arranges for chartered group flights from site to site and for accom-
modations in Spartan Motels, the only chain with accommodations near the mines,for three
nights. Taylor allows Precision Metals to pick up his tab, as do the other
analysts, with one exception—John Adams, an employee of a large trust company
who insists on following his company's policy and paying for his hotel room himself.
Standard I(B) Professionalism: Independence and Objectivity - answer✔Susan Dillon, an analyst
in the corporate finance department of an investment ser-
vices firm, is making a presentation to a potential new business client that includes
ALL RIGHTS RESERVED.
the promise that her firm will provide full research coverage of the potential client.
Standard I(C) Professionalism: Misrepresentation - answer✔Anthony McGuire is an issuer- paid
analyst hired by publicly traded companies to
electronically promote their stocks. McGuire creates a website that promotes his
research efforts as a seemingly independent analyst. McGuire posts a profile and a
strong buy recommendation for each company on the website indicating that the stock
is expected to increase in value. He does not disclose the contractual relationships
with the companies he covers on his website, in the research reports he issues, or in
the statements he makes about the companies in internet chat rooms.
Standard I(C) Professionalism: Misrepresentation - answer✔Hijan Yao is responsible for the
creation and distribution of the marketing materials
for his firm, which claims compliance with t
he GIPS standards. Yao creates and dis-
tributes a presentation of performance by the firm's Asian equity composite that states
the composite has ¥350 billion in assets. In fact, the composite has only ¥35 billion in
assets, and the higher figure on the presentation is a result of a typographical error.
Nevertheless, the erroneous material is distributed to a number of clients before Yao
catches the mistake.
Standard I(D) Professionalism: Misconduct - answer✔Simon Sasserman is a trust investment
officer at a bank in a small affluent town. He
enjoys lunching every day with friends at the country club, where his clients have
observed him having numerous drinks. Back at work after lunch, he clearly is intoxi-
cated while making investment decisions. His colleagues make a point of handling any
business with Sasserman in the morning because they distrust his judgment after lunch.
Standard I(D) Professionalism: Misconduct - answer✔Howard Hoffman, a security analyst at
ATZ Brothers, Inc., a large brokerage house,
submits reimbursement forms over a two- year period to ATZ's self- funded health
2|Page
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