Test Prep CFA® Level I Chartered Financial Analyst CFA® LEVEL 1 Exam Questions in PDF

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 11)

Willier is the research analyst responsible for following Company X. All the information he has accumulated and documented suggest that the outlook for the firm's new products is poor, so the stock should be rated a weak hold. During lunch, however, Willier overhears a financial analyst from another firm offer opinions that conflict with Willier's forecasts and expectations. Upon returning to his office, Willier releases a strong buy recommendation to the public. Willier:

  1. violated the Standards by failing to distinguish between facts and opinions in his recommendation.
  2. was in full compliance with the Standards.
  3. violated the Standards because he did not have a reasonable and adequate basis for his recommendation.
  4. violated the Standards because he did not seek approval of the change from his firm's compliance department.

Answer(s): C

Explanation:

The question deals with Standard IV (A.1), Reasonable Basis and Representations. Willier's actions in changing the recommendation based on the opinion of another financial analyst is not an adequate basis for the recommendation. This question does not illustrate a violation of the need to distinguish between facts and opinions. Seeking approval from the firm for a change in a recommendation is a matter of policy set by the firm, not by the Standards.



Under AIMR Rules of Procedure for the Proceeding Related to Professional Conduct, membership in AIMR and/or the right to hold and to use the CFA designation may be summarily suspended by AIMR's Designated Officer for the following misconduct:

  1. Conviction for a crime that is defined as a felony or its equivalent.
    II. Indefinite bar from registration under the securities laws (even though reapplication may be made after a specific period of time).
    III. Failure to complete and return a professional conduct statement for each of two successive years.
  2. I only.
  3. I and II only.
  4. IV only.
  5. II only.
  6. III only.
  7. II and III only.
  8. I, II and III.

Answer(s): G

Explanation:

This question relates to AIMR's summary suspension powers as defined in the Bylaws under the Professional Conduct Program. Statements I, II and III describe grounds for summary suspension of membership in AIMR and/or the right to hold and use the CFA designation.



Grey recommends the purchase of a mutual fund that invests solely in long-term U.S. Treasury bonds. He

makes the following statements to his clients:

  1. "The payment of the bond is guaranteed by the U.S. government; therefore, the default risk of the bonds is virtually zero."
    II. "If you invest in the mutual fund, you will earn a 15 percent rate of return each year for the next several years." Did Grey's statements violated AIMR's Code and Standards?
  2. Neither statement violated the Code and Standards.
  3. Statement I and II violated the code and Standards.
  4. Only statement I violated the Code and Standards.
  5. Only statement II violated the Code and Standards.

Answer(s): D

Explanation:

This question deals with Standard IV (B.6), Prohibition against Misrepresentation. Statement I is a factual statement that discloses to clients and prospects accurate information about the terms of the investment instrument. Statement II, which guarantees a specific rate of return, is an opinion stated as a fact and therefore violates Standard IV (B.6).



Standard III (D) is ________.

  1. None of these answers
  2. Disclosure of Additional Compensation Arrangements
  3. Disclosure of Conflicts to Employer
  4. Obligation to Inform Employer of Code and Standards
  5. Duty to Employer
  6. Responsibilities of Supervisors

Answer(s): B

Explanation:

Standard III (A) deals with the Obligation to Inform Employer of Code and Standards. Standard III (B) deals with the Duty to Employer. Standard III (C) deals with Disclosure of Conflicts to Employer. Standard III (D) deals with Disclosure of Additional Compensation Arrangements. Standard III (E) deals with Responsibilities of Supervisors.



Level I verification requires independent attestation that the requirements of the AIMR-PPS have been met on a (n) ________ basis.

  1. international
  2. attainable
  3. nationwide
  4. firmwide

Answer(s): D

Explanation:

This is a requirement under Level I verification procedures.



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