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

Free Financial CFA Level 1 Dumps Questions (page: 92)

When a trustee for private investment funds has responsibility toward current beneficiaries who are income oriented and future beneficiaries ("remaindermen") who are capital growth oriented, she has primary fiduciary duty toward:

  1. both have to be treated on the same footing.
  2. the income beneficiaries.
  3. the remaindermen.
  4. insufficient information.

Answer(s): A

Explanation:

Personal trust account trustees are subject to the "Prudent Man Rule" in their investment behavior and are required to follow the guidelines of the trust. In particular, when there are conflicting interests involved, the trustee is required to maintain an equitable balance between the interests of different groups. Standard IV (B.1)
- Fiduciary Duties - and the Topical Study, "Fiduciary Duty."



Level II verifiers must obtain and review ________ to ensure proper recording of cash flows.

  1. end of period returns
  2. accounting methods
  3. bank reconciliation
  4. cash flow statements

Answer(s): C

Explanation:

This procedure must be carried out to determine whether capital contributions and withdrawals that are used in the performance calculations are recorded in the proper accounts, at the right amounts and on a timely basis.



Standard IV (B) is known as ________.

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

Answer(s): E

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.



The ERISA fiduciary needs to be as prudent as

  1. the average investment advisor.
  2. the average person.
  3. the average expert.
  4. none of these answers.

Answer(s): C

Explanation:

Under ERISA, the fiduciary is held to a higher standard than the Prudent Man Rule. The ERISA fiduciary needs to be as prudent as the average expert, not simply as prudent as the average person. Like all fiduciaries, however, the ERISA fiduciary must act solely in the best interest of the plan participants and beneficiaries and use all available care, skill, prudence and diligence.



Ward is scheduled to visit the corporate headquarters of Evans Industries. Ward expects to use the information obtained to complete his research report on Evans stock. Ward learns that Evans plans to pay all of Ward's expenses for the trip, including the cost of meals, hotel room and air transportation. Which of the following actions would be the best course for Ward to take under the Code and Standards?

  1. Accept the expense-paid trip and write an objective report.
  2. Write the report without taking the trip.
  3. Pay for all travel expenses, including costs of meals and incidental items.
  4. Accept the expense paid trip but disclose the value of the services accepted in the report.

Answer(s): C

Explanation:

The best course of action, under Standard IV (A.3), Independence and Objectivity, is to avoid a conflict of interest whenever possible. Therefore, paying for all expenses is the correct answer. Merely disclosing the conflict is not as appropriate as avoiding the conflict of interest altogether. Writing an objective report would not remove the appearance of a conflict of interest. Not taking the trip is incorrect, because Ward would not be taking advantage of close inspection of the company and his report would not be using all the information available.



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