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

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 24)

Various countries' securities laws permit a manager to pay up for goods and services without violating the manager's fiduciary duty, so long as the requirements of the law are followed. Each of the following are typical requirements, except:

  1. the goods or services purchased must be for "brokerage service."
  2. the commission paid must be reasonable in relation to the research and execution services received.
  3. none of these answers.
  4. at all times, the manager must seek best price and execution.
  5. the manager's soft-dollar practice must be disclosed.

Answer(s): A

Explanation:

The good and services purchased must be for "research service."



According to Standard IV (B.4), Priority of Transactions, ________ is recommended when a manager has purchased a security in violation of trading policy.

  1. forfeit of wages for one month
  2. a fine imposed by the SEC
  3. a civil damage
  4. public censure
  5. disgorgement

Answer(s): E

Explanation:

This question relates to the compliance procedures for Standard IV (B.4), one of which states that firms should establish disciplinary procedures to enforce the standard. If a manager has purchased a security in violation of trading policy, disgorgement is recommended. Managers should disgorge all profits and assume any losses from the trade.



Pulser Primorak is an investment manager who recently bid in an IPO on behalf of his clients and was allowed to buy 1,000 shares of the issue. What should Primorak do?

  1. He should distribute the IPO shares amongst the client accounts over which he has discretionary investment powers on a pro rata basis.
  2. He should treat all his customers equally and fairly by distributing the IPO shares amongst all his client accounts on a pro rata basis.
  3. He should distribute the IPO shares amongst all his client accounts for which the IPO is an appropriate investment on a pro rata basis.
  4. The question is based on a false premise. Primorak should not have bid on an IPO in the first place since this violates the AIMR code of Ethics.

Answer(s): C

Explanation:

Standard IV (B.3) - Fair Dealing. Note that the AIMR code does not prohibit investments by portfolio managers in IPOs if they are deemed appropriate investments.



Members pursuing the investment profession outside of the U.S. ________ the Code and Standards when local regulations are less stringent in order to maintain a level playing field.

  1. may disregard
  2. can modify
  3. should ignore
  4. must adhere to

Answer(s): D

Explanation:

The concept of fiduciary duty is not exclusive to the United States. AIMR members are expected to follow any fiduciary duties imposed on them by their country or province, in addition to being governed by the Codes and Standards. As always, the primary concern must be to follow principles of discretion, loyalty and care and to act in the client's best interest.



The AIMR Performance Presentation Standards require that firms report, at a minimum, ________ years of performance to claim compliance with the standards.

  1. one
  2. fifteen
  3. five
  4. ten
  5. seven
  6. two

Answer(s): D

Explanation:

The AIMR-PPS require that firms report, at a minimum, 10 years of investment performance (or performance since the inception of the firm if inception is less than 10 years) to claim compliance with the Standards.



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