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

Free Test Prep CFA® LEVEL 1 Real Questions (page: 74)

Which of the following AIMR Standards states that the financial analyst must use reasonable judgment as to the inclusion of relevant factors in research reports?

  1. III (C.2)
  2. III A
  3. III D
  4. IV (A.2)

Answer(s): D

Explanation:

Standard IV (A.2) - Research Reports states: "Members shall use reasonable judgment regarding the inclusion or exclusion of relevant factors in research reports."



Meriam Mastrani is a senior member of "The Seven Samurai," a high-flying hedge fund. Meriam supervises a group of 6 portfolio managers and is also involved in advising some independent clients. To prevent violations of securities laws at the firm, Meriam has instituted some standard procedures in conjunction with the Compliance Department. However, for the past 6 months, he has been extremely busy catering to his clients to be able to check on the weekly compliance reports. Meriam does not have a deputy whom he can delegate his duties to. No violations of any laws have been detected at The Seven Samurai. Meriam has

  1. has not violated any standard in the AIMR code of ethics.
  2. violated Standard III (B) - Duty to the Employer.
  3. violated Standard III (E) - Responsibilities of Supervisors.
  4. none of these answers.

Answer(s): C

Explanation:

Standard III (E) - Responsibilities of Supervisors - requires that supervisors must take reasonable care to ensure that their subordinates do not violate any laws or the code of conduct. This includes designing effective procedures to deter fraudulent activity. However, merely enacting such procedures does not fulfill the member's duties. If steps are not taken to make sure that the restrictions are being abided by, the member could be deemed in violation of Standard III (E). By not keeping track of the activities of his subordinates for an extended period of time and not having a deputy to whom such a duty could be delegated, Meriam has violated Standard III (E).



Brown works for an investment counseling firm. Green, a new client of the firm, is meeting with Brown for the first time. Green used another counseling firm for financial advice for years, but she has switched her account to Brown's firm. After a few minutes of get-acquainted talk, Brown explained to Green that she has discovered a highly undervalued stock that offers large potential gains. She recommends that Green purchase the stock. Brown has committed a violation of the Standards. What should she have done differently?

  1. Brown should have determined Green's needs, objectives and tolerance for risk before making a recommendation for any type of security.
  2. Brown should have explained her qualifications, including her education, training, experience and the meaning of the CFA designation.
  3. Brown should have asked Green her reasons for changing counseling firms. If the discovery process indicated that Green had been treated unfairly at the other firm, Brown should have notified AIMR of any violation.
  4. Brown should have thoroughly explained the characteristics of the company to Green, including the characteristics of the industry in which the company operates.

Answer(s): A

Explanation:

Brown has provided investment recommendation before making inquiries about the client's financial situation, investment experience or investment objectives. Brown is thus violating Standard IV (B.2), Portfolio Investment Recommendations and Actions. Why the client changed investment firms is not useful information to provide suitable recommendations. The other answers indicate information members should discuss with their clients at the outset of the relationship, but these answers do not constitute a complete list of those factors.



Performance Presentation Standards state that subsectors of larger international composites may be used to create stand-alone composites only if the subsectors are managed as ________ entities.

  1. independent
  2. two
  3. unique
  4. separate

Answer(s): D

Explanation:

Subsectors or carve-outs of larger international composites may be used to create stand-alone composites only if the subsectors are managed as separate entities with their own cash allocations and currency management.



Standard III (C) deals with conflicts of interest of a member with ________.

  1. other investment professionals
  2. none of these answers
  3. the client
  4. colleagues at the same firm
  5. the investing public

Answer(s): B

Explanation:

Standard III (C) deals with conflicts of interest in any actions or decisions of a member with the employer.
Remember, all Standards under Standard III deal with the employer.



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