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

Free Financial CFA Level 1 Dumps Questions (page: 75)

Standard IV (A.3) relates to two major components and is titled Independence and ________.

  1. Objectivity
  2. None of these answers
  3. Impartiality
  4. Autonomy
  5. Justice

Answer(s): A

Explanation:

Standard IV (A.3) - Independence and Objectivity, states that members shall use reasonable care and judgment to achieve and maintain independence and objectivity in making investment recommendations or taking investment action.



Trisdale is a portfolio manager who has consistently outperformed the market on a risk-adjusted basis for the past 3 years. As an appreciation for his work, one of his clients recently gave him a travel package to Vancouver worth around $5,000. Trisdale informed his supervisor about this gift and then took time off from work to enjoy a vacation in Vancouver. Trisdale has

  1. violated Standard III (D) - Disclosure of Additional Compensation Arrangements.
  2. violated Standard IV (A.3) - Independence and Objectivity.
  3. not violated the AIMR code of ethics.
  4. violated Standard IV (B.3) - Fair Dealing.

Answer(s): C

Explanation:

The AIMR code of ethics does not preclude members from accepting gifts in excess of the modest amount of $100 from clients, as long as they are disclosed to the immediate supervisor. What the code does prohibit is acceptance of gifts in excess of $100 from parties that have a strong motive to influence the judgment of the members (e.g., companies that a member might be researching for investment recommendations). The disclosure of additional compensation arrangements with clients allows the supervisory authorities to monitor the portfolio activity and ensure that the gift-giving client's portfolio is not receiving any undue favorable treatment.



Currency overlay portfolios must be valued at least ________.

  1. monthly
  2. yearly
  3. quarterly
  4. hourly
  5. daily

Answer(s): C

Explanation:

In accordance with the AIMR-PPS, currency overlay portfolios must be valued at least quarterly, but because of the volatile nature of these portfolios, firms may need to revalue currency overlay portfolios more frequently than quarterly to obtain full and fair disclosure.



Standard III (A) deals with ________.

  1. None of these answers
  2. Obligation to Inform Employer of Code and Standards
  3. Professional Misconduct
  4. Use of Professional Designation
  5. Plagiarism
  6. Duty to Employer
  7. Disclosure of Conflicts to Employer
  8. Fundamental Responsibilities

Answer(s): B

Explanation:

Standard I deals with Fundamental Responsibilities. Standard II (A) deals with Use of Professional Designation.
Standard II (B) deals with Professional Misconduct. Standard II (C) deals with Plagiarism. Standard III (A) deals with the Obligation to Inform Employer of Codes and Standards. Standard III (B) deals with the Duty to Employer. Standard III (C) deals with Disclosure of Conflicts to Employer.



Standard III (D), Disclosure of Additional Compensation Arrangements is important because

  1. outside arrangements may affect loyalties and objectivity and create potential conflicts of interest.
  2. none of these answers.
  3. outside arrangements are not allowed under circumstances.
  4. third parties are inherently in competition with the current employer.
  5. the verbal disclosure requirement allows for "compensation in kind."
  6. all of these answers.

Answer(s): A

Explanation:

Under Standard III (D), members must disclose outside compensation/benefits to employers because outside arrangements may affect loyalties and objectivity and create potential conflicts of interest. Disclosure thus allows an employer to consider the outside arrangements when evaluating the actions and motivations of members. Moreover, the employer is entitled to have full knowledge of compensation/benefit arrangements to assess the true cost of the outside services members are providing.



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