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

Free Test Prep CFA® LEVEL 1 Real Questions (page: 57)

In order to comply with Standard IV (B.4), Priority of Transactions, firms should prepare and distribute to firm personnel a code of ethics and compliance procedures.

The code and procedures should do all of the following, EXCEPT:

  1. ensure that procedures will be enforced.
  2. contain disciplinary procedures.
  3. limit the number of access persons.
  4. establish reporting and prior-clearance requirements.
  5. define personal transactions, investment and prohibited transactions.
  6. maintain a list of clients and their holdings.
  7. consider special situations.

Answer(s): F

Explanation:

The question deals with the compliance procedures under Standard IV (B.4). Personal transactions must be defined to all employees. The number of access persons - those who have knowledge of pending or actual recommendations or action - should be limited, by implementing Fire Walls. A reporting system for all employees' personal transactions should be established, as well as procedures for special situations. Authority should be given to a compliance officer to enforce the procedures, which should include disciplinary action.
Maintaining lists of client holdings is NOT a compliance procedure under Standard IV (B.4), but Standard IV (B.3).



The procedures for compliance with Standard IV (B.8), Disclosure of Referral Fees, recommend that you disclose all referral agreements ________.

  1. at least orally
  2. any of these answers
  3. orally or in writing
  4. in writing

Answer(s): D

Explanation:

Under Standard IV (B.8), members should disclose all agreements in order to be in compliance. Members should disclose, in writing, the existence and terms of any referral agreement to any client or prospective client as soon as the member learns that the client or prospective client has been referred by a firm receiving a referral fee.



When taking on a new affiliation while working for his present employer, a member should:

  1. notify his employer in writing and obtain written consent.
  2. notify any prospective affiliation of his present employer.
  3. not render services to a new client until the client gives consent in writing.
  4. all of these answers are correct.

Answer(s): D

Explanation:

The procedures for compliance with Standard III (B) state that members should not render services until receiving written consent from their employer to all of the terms of the arrangement, after having provided written statements describing the types of services to be rendered to independent affiliations. A member should also disclose to prospective clients the identity of the member's employer and clarify that the member is performing independently of the employer. The member should not render services until the client gives consent in writing indicating that the client has read and understood the member's written disclosure statement.



Relationships with and Responsibilities to the Profession are dealt with under:

  1. Standard II
  2. Standard IV
  3. None of these answers
  4. Standard I
  5. Standard V
  6. Standard III

Answer(s): A

Explanation:

Relationships with and Responsibilities to the Profession are dealt with under Standard II.



Which AIMR standard states that members must inform employers of their duty to comply with the Code and Standards and must deliver a copy to their employers?

  1. IX
  2. IV
  3. III A
  4. II A

Answer(s): C

Explanation:

Standard III (A) Obligation to Inform Employer of Code and Standards states: Members shall: "(1) Inform their employer in writing, through their direct supervisor, that they are obligated to comply with the Code and Standards and are subject to disciplinary sanctions for violations thereof, and (2) Deliver a copy of the Code and Standards to their employer if the employer does not have a copy."



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