CFA Level I Chartered Financial Analyst CFA I Exam Questions in PDF

Free CFA CFA I Dumps Questions (page: 20)

Chan and Chung are two of the five Managing Directors of Alfalfa, a mid-size hedge fund. In a recent court case involving a securities lawsuit, Chan was called on to testify as an expert on securities research. During his testimony, Chan had to invoke several results from a proprietary research carried out by his staff at Alfalfa. He did so without specifically attributing the results to them. At around the same time, Chung had to meet with a few prospective clients for a business presentation. During this presentation, he showed them some of the results obtained by Chan's team, without specifically acknowledging the research team. Instead, he referred to them with phrases like, "our studies indicate that..." In this set of events, as it relates to Standard II(C) - Prohibition against Plagiarism,

  1. neither Chan nor Chung has violated the standard.
  2. Chan has not violated the standard while Chung has.
  3. both Chan and Chung have violated the standard.
  4. Chan has violated the standard while Chung has not.

Answer(s): D

Explanation:

In the interactions with clients, senior management members represent the firm and as such, do not have to give specific attribution to research results obtained by employees of the firm. Hence, Chung has committed no violation. On the other hand, in the capacity of an expert, Chan is not representing the firm but himself. In such a case, he has to properly acknowledge the sources of all results he quotes. Refer to Standard II(C).



Standard IV (B.3) deals with ________.

  1. Duty to Employer
  2. Professional Misconduct
  3. Interactions with Clients and Prospects
  4. None of these answers
  5. Prohibition against Use of Material Nonpublic Information
  6. Preservation of Confidentiality
  7. Fair Dealing
  8. Investment Process

Answer(s): G

Explanation:

Standard IV (A) deals with the Investment Process. Standard III (B) deals with Duty to Employer. Standard IV (B.3) deals with Fair Dealing. Standard IV (B) deals with Interactions with Clients and Prospects. Standard V (A) deals with Prohibition against Use of Material Nonpublic Information. Standard IV (B.5) deals with Preservation of Confidentiality. Standard II (B) deals with Professional Misconduct.



Brikland Strickowski learned a month ago that one of his clients, Stratmann, had been regularly using inside information provided by numerous "contacts" in various firms to generate his trading activity with Brikland. Brikland was surprised at Stratmann's recklessness but did not want to get him into trouble so he did not inform anyone about this. AIMR has been tipped about Stratmann's activity and one of the investigators from AIMR's Professional Conduct Program (PCP) recently got in touch with Brikland about this. Brikland, in his desire not to have his CFA designation voided by AIMR, decided to divulge everything he knew about Stratmann's investment activity, though this information is considered confidential even by AIMR. Which of the following is/ are true about this sordid mess?

  1. Brikland violated Standard IV (B.5) - Preservation of Confidentiality -by revealing confidential information about Strattman to the PCP investigator.
    II. Strattman violated Standard V (A) - Prohibition Against Use of Non-Public Information.
    III. Brikland violated Standard I - Fundamental Responsibilities - by not informing his supervisor and/or the SEC about the insider trading.
    IV. Brikland violated Standard I - Fundamental Responsibilities - by not dissociating himself from Strattman's portfolio.
  2. I, II, III and IV
  3. II only
  4. II and IV
  5. I, II and IV only

Answer(s): C

Explanation:

As an AIMR member, Brikland must cooperate fully with any investigation carried out by the PCP. Since the information revealed during the investigation is kept in strict confidentiality, such a cooperation is not considered a violation of Standard IV (B.5) - Preservation of Confidentiality. Indeed, the Code of Ethics expressly requires members to cooperate with such investigations, failing which the member can be summarily suspended. Note that the Code does not require members to report criminal activity to proper authorities, though doing so is most often prudent and a suggested course of action (Standard I - Fundamental Responsibilities). However, if the member knowingly participates in illegal activities or does not dissociate himself from such activities, he would be violating the code.



Xuanchi Zuan is a successful portfolio manager with Up & Away, a money management fund that operates strongly bullish funds. One of Zuan's clients, Margo Margolis, is about to retire in a couple of years. Margo has been phasing out her risky investments over the past five years, moving them into longterm treasury bonds. However, she recently read in a financial magazine the attractiveness of investing in emerging markets. She was especially enticed by the 30% and 40% annual returns observed in these markets over the past 2-3 years. She approaches Zuan and instructs him to move 30% of her funds into these markets. Zuan should:

  1. none of these answers.
  2. evaluate the emerging market investments and move the funds only if he considers them suitable for investment for Margo.
  3. refuse to do so, pointing out the high risks involved in such investments.
  4. move the funds into emerging market securities per Margo's request.

Answer(s): A

Explanation:

Zuan cannot refuse to do something that his client instructs him to do, as long as it is legal. However, it is his duty to apprise his clients of the risks and returns associated with different instruments and advise them about the suitability of including such investments in their portfolios. Once the client is aware of all the pitfalls and rewards, the final decision must rest with the client. In Margo's case, Zuan should do the same before acting on her instructions. This question relates most directly to Standard IV (B.1) - Fiduciary Duties.



If every one of your research reports had a statement stating that every research report on issues by a corporate client reflects the unbiased opinion of the analyst, you would be complying with Standard ________.

  1. IV (3)
  2. IV (A.1)
  3. IV (A.2)
  4. II (A)
  5. II (C)
  6. II (B)

Answer(s): A

Explanation:

To avoid violations of Standard IV (A.3), one of the procedures members should comply with is the need to protect the integrity of opinions. Members and their firms should establish policies stating that every research report on issues by a corporate client reflects the unbiased opinion of the analyst. In this way, firms ensure that the independence and objectivity of their member analysts is maintained.



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