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

Free Test Prep CFA® LEVEL 1 Real Questions (page: 66)

Standard III of the Standards of Professional Conduct deals with Relationships with and Responsibilities to ________.

  1. AIMR
  2. Clients and Prospects
  3. None of these answers
  4. the Employer

Answer(s): D

Explanation:

Standard III of the Standards of Professional Conduct deals with Relationships with and Responsibilities to the Employer.



Standard IV (B.8) deals with ________.

  1. Prohibition against Use of Material Nonpublic Information
  2. Preservation of Confidentiality
  3. None of these answers
  4. Prohibition against Misrepresentation
  5. Disclosure of Referral Fees
  6. Disclosure of Conflicts to Clients and Prospects
  7. Priority of Transactions

Answer(s): E

Explanation:

Standard IV (B.8) states that members shall disclose to all clients any referral fees received by the member for the recommendation of any services to the client or prospect.



Which of the following statements is NOT correct?

  1. Members who work in a country where the Code and Standards impose a lesser degree of responsibility than local laws and regulations must still adhere to the Code and Standards.
  2. All of these statements are correct.
  3. Standards II through V address specific conduct.
  4. Standard I sets forth minimum standards relating to general activities.

Answer(s): A

Explanation:

If a member lives in a country, or provides investment services to a client residing in a country, with more strict securities laws than the Codes and Standards, he/she must comply with the more strict laws and regulations of the country.



Which of the following is NOT a form of plagiarism as defined by AIMR code of conduct?

  1. Copying proprietary software programs without permission.
  2. Using data from a well-known statistical service without attribution.
  3. Citing specific quotations to "leading analysts," without specific reference.
  4. Using publicized research reports prepared by others without attribution.

Answer(s): B

Explanation:

Standard II(C) - Prohibition against Plagiarism considers a use of factual information published by recognized financial and statistical services without attribution acceptable. All of the others are forms of plagiarism and violations of Standard II(C).



Silverio Arvantis is an aggressive and quick-silver analyst with Foresi Associates, an investment advisory firm. Silverio, a freshly minted Ph.D. from the University of Chicago, recently formulated an algorithm for selecting the portfolio weights in relatively new high-tech stocks. The algorithm evaluates 43 different variables to choose the investments and as such, is fairly complex in nature. Not wishing to drown his clients in esoteric terms like "martingale" and "stochastic transformation," Silverio writes up a short report which touches only briefly on the major characteristics of the model. Instead, he focuses on the performance of the model on past market data, which is absolutely sterling. Based on these tests, Silverio recommends 4 stocks for immediate purchase.
Silverio has:

  1. violated Standard V (B) - Performance Presentation by relying on past data.
  2. not violated any standards.
  3. violated Standard IV (A.2) - Research Reports by failing to disclose sufficient details about the algorithm.
  4. violated Standard IV (A.2) - Research Reports by failing to distinguish opinion from fact.

Answer(s): C

Explanation:

Standard IV (A.2) requires the member to disclose details of the reasoning and logic behind the recommendations so that investors can follow and challenge it and analyze the risks inherent in the recommended strategy. While Silverio does not have to delve into excessive technical details or reveal any proprietary formulas, the report must contain explanations for the recommendations. By omitting these, he has violated Standard IV (A.2). Note, however, that there is no evidence that he has confused opinion with fact.



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