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

Free Test Prep CFA® LEVEL 1 Dumps Questions (page: 47)

Which of the following statements is/are correct under the Code and Standards?

  1. AIMR members are prohibited from undertaking independent practice in competition with their employer.
    II. Written consent from the employer is necessary to permit independent practice that could result in compensation or other benefit in competition with a member's employer.
    III. Written consent from the outside prospective client is necessary to permit independent practice that could result in compensation or other benefit in competition with a member's employer.
    IV. Members are prohibited from making arrangements or preparations to go into a competitive business before terminating their relationship with their employer.
  2. II, III and IV only.
  3. I and IV only.
  4. IV only.
  5. II and III only.

Answer(s): D

Explanation:

This question pertains to Standard III (B), which states that members may undertake independent practice that may result in compensation or other benefit in competition with a member's employer, so long as they obtain written consent from both their employer and those for whom they undertake the independent practice.
Statements II and III are consistent with this Standard. Statement I is incorrect because the Standards do not completely prohibit independent practice. Also, Statement IV is incorrect because the Standards allow members to make arrangements or preparations to go into competitive business so long as those arrangements do not interfere with their duty to their current employer.



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 manager's soft-dollar practice must be disclosed.
  2. the compensation received for engaging in the paying up must be reported in writing to the manager's employer.
  3. the commission paid must be reasonable in relation to the research and execution services received.
  4. the goods or services purchased must be for "research service."
  5. at all times, the manager must seek best price and execution.

Answer(s): B

Explanation:

When paying up for goods and services, the requirements to be met include:
- ensuring that the goods or services purchased must be for "research service;"
- the commission paid must be reasonable in relation to the research and execution services received;
- the manager's soft-dollar practice must be disclosed, and
- at all times, the manager must seek best price and execution. However, there is no requirement for any disclosure of compensation to the manager's employer.



Miller heads the research department of a large brokerage firm. The firm has many analysts, some of whom are subject to the Code and Standards. If Miller delegates some supervisory duties, which statement best describes her responsibilities under the Code and Standards?

  1. Miller's supervisory responsibilities do not apply to those subordinates who are not subject to the Codes and Standards.
  2. Miller no longer has supervisory responsibility for those duties delegated to her subordinates.
  3. Miller retains supervisory responsibility for those duties despite her delegation of some duties.
  4. AIMR's Standards prevent Miller from delegating supervisory duties to subordinates.

Answer(s): C

Explanation:

Under Standard III (E), Responsibilities of Supervisors, members may delegate supervisory duties to subordinates but such delegation does not relieve members of their supervisory responsibilities. Moreover, whether or not Miller's subordinates are subject to AIMR's Code and Standards is irrelevant to her supervisory responsibilities. Thus, Miller still retains supervisory responsibilities.



Which of the following can be found in Standard III?

  1. Members shall not misrepresent investment performance.
  2. Members shall exercise diligence and thoroughness in making investment recommendations or in taking investment actions.
  3. Members shall not participate in any professional conduct involving dishonesty, fraud, deceit, etc.
  4. Members shall deliver a copy of the Code to their employer.
  5. Members shall not knowingly participate or assist in any violation of laws, rules, or regulations.

Answer(s): D

Explanation:

Standard III states that members shall deliver a copy of the Codes and Standards to their employer if the employer does not have a copy.



Level ________ verification assures that all of the firm's actual, discretionary, fee-paying portfolios are included in at least one composite.

  1. V
  2. II
  3. IV
  4. I
  5. III

Answer(s): D

Explanation:

Level I Verification requires that each of the firm's discretionary, fee-paying portfolios is included in at least one composite and that the firm's procedures for assigning portfolios to composites are reasonable and have been consistently applied over time.



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