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

Free Test Prep CFA® LEVEL 1 Real Questions (page: 60)

Standard III (B) is ________.

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

Answer(s): F

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.



Charlice is a portfolio manager who manages (with the help of four analysts) the pension plan assets of Gordon Industries. Charlice received this account four years ago from Gordon Industries Vice President, Michael Burnbaum, who is also in charge of investment oversight. To whom does Charlice owe fiduciary duties?

  1. Michael Burnbaum, in his capacity as Gordon Industries' Investment Officer.
    II. The employees of Gordon Industries.
    III. The pension beneficiaries at Gordon Industries.
  2. III only
  3. I and III only
  4. I only
  5. II and III only

Answer(s): A

Explanation:

A portfolio manager owes fiduciary responsibility to the beneficiaries of the portfolio he is managing. In case of pension plans, the loyalty is not owed to the person who hired the manager or to the entity that set up the fund.
Rather, the responsibility lies toward the ultimate plan beneficiaries; in the case of Gordon Industries, it is the pension plan beneficiaries (though not all employees are pension recipients so II is not a valid choice).
Standard IV (B.1) - Fiduciary Duties - and the Topical Study, "Fiduciary Duty."



Which of the following can be found in Standard III?

  1. Members shall make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in breach of a duty.
  2. Members shall maintain knowledge of and comply with all applicable laws.
  3. Members shall maintain appropriate records to support the reasonableness of recommendations.
  4. Members shall not participate in plagiarism.
  5. Members shall not undertake any independent practice in competition with employer without written consent.

Answer(s): E

Explanation:

Standard III states: "Members shall not undertake any independent practice that could result in compensation or other benefit in competition with their employer without written consent from both the employer and the person for whom they undertake independent practice."



When complying with Standard IV (B.3) - Fair Dealing, there are certain points one should be sure to address when establishing compliance procedures. Which of the following points is NOT mentioned in the Standards of Practice Handbook?

  1. Disclose levels of service.
  2. Limit the number of people involved.
  3. Shorten the time frame between decision and dissemination.
  4. Establish procedures for determining material change.
  5. Simultaneous dissemination.
  6. Disclose all corporate relationships.
  7. Publish personnel guidelines for predissemination.
  8. Establish control over trading activity.

Answer(s): F

Explanation:

Under Standard IV (B.3), members have an obligation to ensure that their firms establish compliance procedures requiring all employees who disseminate investment recommendations or actions to treat clients fairly. The number of people privy to an investment recommendation should be limited. Reasonable efforts should be made to limit the amount of time that lapses between the decision and the dissemination of the recommendation. Guidelines must be established to prohibit persons who have prior knowledge from discussing a pending recommendation. Trading activities should be monitored and controlled. Procedures should be established to determine whether a change in an investment recommendation is considered material.
The organization should disclose to firms whether or not it offers two or more levels of service to clients for the same or different fees.



Standard III (C) deals with ________.

  1. None of these answers
  2. Plagiarism
  3. Obligation to Inform Employer of Code and Standards
  4. Use of Professional Designation
  5. Disclosure of Conflicts to Employer
  6. Fundamental Responsibilities
  7. Duty to Employer
  8. Professional Misconduct

Answer(s): E

Explanation:

Standard I deals with Fundamental Responsibilities. Standard II (A) deals with Use of Professional Designation.
Standard II (B) deals with Professional Misconduct. Standard II (C) deals with Plagiarism. Standard III (A) deals with the Obligation to Inform Employer of Codes and Standards. Standard III (B) deals with the Duty to Employer. Standard III (C) deals with Disclosure of Conflicts to Employer.



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