Financial Institute CFA Level I Chartered Analyst® CFA Level 1 Exam Questions in PDF

Free Financial CFA Level 1 Dumps Questions (page: 56)

Which of the following statements is NOT true relating to Standard IV (B.3) - Fair Dealing?

  1. This standard covers the conduct of two groups: those who prepare recommendations and those who take investment action.
  2. Members shall deal equally and objectively with all clients.
  3. Only through the fair treatment of all parties can the investment management profession maintain the confidence of the investing public.
  4. None of these answers.
  5. This standard covers investment action such as general purchases, new issues, or secondary offerings.

Answer(s): B

Explanation:

The operative word is "fairly," not "equally." The term "fairly" implies that the member must take care not to discriminate against any customers or clients when disseminating investment recommendations. Members could not possibly reach all clients "equally" (i.e., simultaneously). In addition, each client has unique needs, investment criteria and investment objectives.



Grazelle Garbo has decided to change the recommendation on one of the firms she is following from hold to buy. She has communicated her research report to her senior manager, who is reviewing it. If the recommendation passes muster, it will be released three days from now. In the meanwhile, Grazelle has decided to follow her research and purchase the stock for several of her clients' accounts for which the stock is an appropriate investment and for which she has discretionary investment powers. In the course of the luncheon meeting that same day, she mentioned that she had bought the stocks for some client accounts to one of her prospective clients and described her research which caused her to change her recommendation.
Grazelle has

  1. violated Standard IV (B.3) - Fair Dealing - by revealing the change in recommendation.
    II. violated Standard IV (B.5) - Preservation of Confidentiality - by revealing the information about stock purchase.
    III. did not violate the Ethics code.
  2. I and II only
  3. II only
  4. III only
  5. I only

Answer(s): D

Explanation:

Since Grazelle has not revealed any information about the specific client accounts or any confidential information, she is not in violation of Standard IV (B.5) - Preservation of Confidentiality. However, by revealing the information on the change in recommendation prematurely to one of her prospective clients, she has violated Standard IV (B.3) - Fair Dealing. The information is potentially quite valuable and giving to one client before another in a partisan fashion is a violation of the AIMR code of Ethics.



Which of the following AIMR Standards pertains to the use of professional designation?

  1. II (A)
  2. I
  3. III (A)
  4. III (B)

Answer(s): A

Explanation:

Standard II (A) - Use of Professional Designation - states the responsibility of AIMR members, CFA charterholders and candidates for the CFA designation to use their professional designations, or their candidacies for the designation, properly and in a manner that does not mislead the investing public or others.



In reference to AIMR-PPS, which of the following is/are true?

  1. The PPS are explicitly incorporated in the AIMR Code of Ethics and Standards of Professional Conduct.
    II. In case of system incompatibilities, the firm can claim compliance for only those assets that are measured and monitored on compatible systems.
    III. Plan sponsors, consultants and software vendors cannot claim compliance with the PPS; they can only endorse or require their clients to be in compliance.
  2. I, II and III
  3. III only
  4. II and III only
  5. I only

Answer(s): B

Explanation:

The PPS are an adjunct to the AIMR Code of Ethics and Standards of Professional Conduct and not explicitly incorporated in that framework. Compliance with PPS is voluntary, not required.



Standard IV (B.2) deals with ________.

  1. compensation
  2. fair dealing
  3. soft dollars
  4. competition
  5. none of these answers
  6. suitability
  7. proxy voting
  8. disclosure of conflicts

Answer(s): F

Explanation:

Standard IV (B.2) deals with the appropriateness and suitability of investment recommendations for each portfolio or client.



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