Respuesta de Etica

Question 1 - #93502

Your answer: B was correct!

This is an example of the mosaic theory where separate pieces of nonmaterial information are pieced together to make an investment recommendation.

This question tested from Session 1, Reading 2, LOS a, b, c.

Question 2 - #94338

Your answer: A was correct!

Long violated Standard III(E) because he did not preserve the confidentiality of information communicated by clients. Short did not violate Standard III(E) because this standard does not prevent members from cooperating with an investigation by CFA Instituteâ€™s Professional Conduct Program. Thus, Short can forward confidential information to the PCP.


Question 3 - #94786

Your answer: C was incorrect. The correct answer was A) examine whether the strategy is appropriate for the client and explain the implications of the new strategy before implementing the strategy.

According to Standard III(C), Suitability, the member manager must determine that an investment is suitable given the clientâ€™s objectives/constraints and within the context of the clientâ€™s total portfolio. In this case, the member manager must examine the new strategy to see if it is appropriate for the client, even if the client asked for the change. The member should also explain the implications of the strategy to avoid any misrepresentations that may result from omitting details.

This question tested from Session 1, Reading 2-III, LOS C..

Question 4 - #94662

Your answer: B was incorrect. The correct answer was C) neither of these choices.

An analyst should not make a recommendation based only upon a statistical anomaly. Furthermore, none of the other choices would be appropriate. Clients with low risk tolerance should not short sell assets. The analyst cannot make a recommendation to all clients because each client has different characteristics and portfolios. The one answer that may have some merit is to increase the allocation of T-bills in portfolios that have had recent, dramatic increases. This would be for the purposes of maintaining a balanced portfolio. But the decision to rebalance must be made on a case-by-case basis and not for all portfolios.

This question tested from Session 1, Reading 2-V, LOS A..

Question 5 - #94555

Your answer: A was incorrect. The correct answer was B) Trading on information your sister, the firm's attorney, told you over dinner.

Members may not trade on material nonpublic information; therefore, the information conveyed by the firmâ€™s attorney may not be used by a member for trading purposes.

This question tested from Session 1, Reading 2-II, LOS A..

Question 6 - #94373

Your answer: C was incorrect. The correct answer was B) violated the Standards by not dealing fairly with clients but has not violated the Standards regarding material nonpublic information.

Kent must treat all clients fairly in acting on the information, regardless of the size of the investment. The information concerning the fund managerâ€™s departure is not material nonpublic information because its release would have no effect on individual stock prices within the fund and thus should not impact the fund's net asset value.


Question 7 - #127430

Your answer: B was incorrect. The correct answer was A) in violation of Standard V(C) â€œRecord Retention.â€ �

Hurst is most likely in violation of Standard V(C) "Record Retention" because the supporting documentation is unavailable. He needs to recreate the supporting records based on information gathered through public sources or the covered company.

This question tested from Session 1, Reading 2-V, LOS C..

Question 8 - #94675


The last bullet point of the Code says that a member shall â€œMaintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.â€ � Ignoring the neglect of rule changes of others would clearly be incongruent with this component. As long as the colleagues do not violate the laws, the member does not have to disassociate himself from the colleagues.

This question tested from Session 1, Reading 2-I, LOS A..

Question 9 - #94591


According to the procedures for compliance involving Standard I(A), CFA Institute members should determine legality and disassociate from any illegal or unethical activity.




Both Gordon and Haney violated Standard VII(A) by compromising the integrity of the exam. Gordon now has an unfair advantage.

This question tested from Session 1, Reading 2-VII, LOS A..


Part 1)Your answer: A was correct!

No information in the case suggests that Rangenâ€™s conduct violates Standard IV(B), Disclosure of Additional Compensation Arrangements.


Part 2)Your answer: C was correct!

Rangen's actions are inconsistent with Standard III(C), Suitability, because his investment actions are neither appropriate nor suitable for each client. Even if his clients were aware of the risks, the portfolios that he constructed are inconsistent with their financial needs. Because he is in a position to control the volume and frequency of transactions in their accounts, he has control over the accounts. Although Rangen relies upon recommendations from his firmâ€™s research department, he cannot shift blame to his employer because he must follow recommendations that are in the best interests of his clients.



Your answer: C was incorrect. The correct answer was A) start the registration of her new company.

The only action that will not breach Standard IV(A) Loyalty to Employer, is to start the registration of her new company.

This question tested from Session 1, Reading 2-IV, LOS A..


Part 1)Your answer: B was incorrect. The correct answer was C) make recommendations that were consistent with his clients' financial needs.

Rangen did not fulfill the obligation he assumed when he agreed to counsel these clients. That is, he did not make recommendations that were consistent with their financial needs. According to Standard III(C), Suitability, Rangen must â€œconsider the appropriateness and suitability of investment recommendations or actions for each portfolio or client.â€ � This is true even if his clients wanted to speculate and were aware of the risks.


Part 2)Your answer: A was correct!

Rangen cannot shift the blame to his employer. He had an obligation to consider not only his firm's recommendations, but also his clients' investment objectives and financial situations. He failed to consider relevant factors relating to his clients. Rangen violated Standard III(C) because he initiated investment actions without properly considering whether these actions were suitable to his clients' financial situations and investment objectives.



Your answer: B was incorrect. The correct answer was C) can publish his conclusion in a research report.

While the information that Allen received from the Edmonds CEO may be non-public, we are also told that it is non-material. Because Allen has reached his investment conclusion through an analysis of public information together with items of non-material non-public information (ie. "mosaic theory"), publishing this conclusion is not a violation of the Code and Standards.




Standard V(C) Record Retention requires that Members and Candidates document all recommendation and communications with clients. McCoy should document the details of the conversation, including any resulting investment decisions and/or actions. The suitability of the investment should have already been considered before the recommendation and McCoy should not execute the order until the client instructs him to. Identifying other clients for this investment would fall under Standard III(B) Fair Dealing.

This question tested from Session 1, Reading 1, LOS c.



Such a policy is a violation of the Standard and client acknowledgement and/or consent does not change that fact.

This question tested from Session 1, Reading 2-III, LOS B..


Your answer: C was incorrect. The correct answer was B) not violated the Standards.

Because Westfall performed the same degree of research as she did for the other funds on her list, she provided a reasonable and adequate basis for her recommendation. There is not enough information given about the Eligis fund and how it fits in with the other funds on Westfall's list to determine whether or not the standard on Fair Dealing was broken. It was the

Craigs who wanted the Eligis fund and Westfall found it to be acceptable for them and thus added it to her list of acceptable funds. If the Eligis fund was found to possess unique characteristics that were not found in any of the other funds on Westfall's list and the Eligis fund was suitable for some of Westfall's other clients and Westfall hadn't added it to their portfolios after their periodic review then a violation of fair dealing would have occurred.



Your answer: B was incorrect. The correct answer was A) An annual bonus, sent to the analyst by a client, which varies with the performance of the client's portfolio that the analyst manages as an employee even though no verbal or written agreement exists about the bonus.

Standard IV(B) requires that members disclose to their employer in writing all benefits that they receive in addition to their regular compensation for services they perform on behalf of their employer. Since the bonus varies with the performance of the clientâ€™s portfolio, there is a clear link to the services of the analyst. The analyst is not required to report the lunch since it is not linked to performance.

This question tested from Session 1, Reading 2-IV, LOS B..


Your answer: A was incorrect. The correct answer was C) The portfolio securities were carefully selected by Factor to minimize Williams' risk.

Standard I(C), Misrepresentation, prohibits CFA charterholders from misrepresenting characteristics of the portfolio or the services that the company can provide. The only statement that can be accepted as plausible is that the securities were selected to minimize the risk.



Your answer: B was incorrect. The correct answer was C) Smith should promptly disassociate himself from Atlantic's actions by resigning as a director or by reporting the activities to the appropriate authorities.

Smith should disassociate from any illegal activity by resigning as a director or by reporting the activities to appropriate authorities. Inaction combined with continuing association with Atlantic's illegal conduct may be construed as participation, or assistance, in the illegal conduct.



Your answer: C was correct!

Bellow did not violate Standard I(A), Knowledge of the law, because he sought advice of counsel and followed that advice. Bellow did not violate Standard I(C), Misrepresentation, because he made reasonable and diligent efforts to ensure the accuracy of the information and to avoid any material representation.



Your answer: A was incorrect. The correct answer was B) soft dollar practices.

Directing client brokerage for research and/or services is called soft dollar practices.




The current yield curve is factual information that is available from many recognized financial or statistical reporting services.

This question tested from Session 1, Reading 2-I, LOS C..



Standard IV(C) permits members to delegate supervisory duties but such delegation does not relieve members of their supervisory responsibility.

This question tested from Session 1, Reading 2-IV, LOS C..


Your answer: B was incorrect. The correct answer was A) not permissible under the Code and Standards.

Standard III(B) requires a member to deal fairly with all clients when taking investment actions. Since she knew at the outset that she was going to place shares in all accounts, regardless of the first letter of the surname, all accounts must participate on a pro-rata basis in each block in order to conform to the Standard. Her actions constitute a violation of the Standard concerning fair dealing.

This question tested from Session 1, Reading 2-III, LOS B..


Your answer: B was incorrect. The correct answer was C) No, because it is a statement of fact.

The statement is not a violation because it is a fact. However, the member must not go on to claim superior performance.

This question tested from Session 1, Reading 2-VII, LOS B..


Your answer: A was incorrect. The correct answer was B) should revise the recommendation based on this new information.

This question is related to Standard V(B) which states that CFA Institute members should use reasonable judgment regarding the inclusion or exclusion of relevant factors in research reports. The change in management was a relevant factor and must be disclosed before dissemination.

This question tested from Session 1, Reading 2-V, LOS B..


Your answer: C was incorrect. The correct answer was B) Both Standard I(B) Independence and Objectivity and Standard V(A) Diligence and Reasonable Basis.

Whitman violated Standard V(A) Diligence and Reasonable Basis because he did not have a reasonable and adequate basis for issuing a favorable recommendation. Whitman violated Standard I(B) Independence and Objectivity because he did not act independently in issuing his recommendation but instead was influenced by senior management at Hilton and Ross.



Your answer: A was incorrect. The correct answer was B) current clients, former clients, and prospects.

According to Standard III(E), Preservation of Confidentiality, an analyst must preserve the confidentiality of information communicated by clients, former clients, and prospects.

This question tested from Session 1, Reading 2-III, LOS E..



Standard of Professional Conduct III(C), not the Code of Ethics, requires that investments be appropriate and suitable.

This question tested from Session 1, Reading 1, LOS b.



While any of the answers can be shown to violate CFA Institute Standards, this cannot be determined conclusively from the information given. However, the scenario clearly indicates that Anderson does not distinguish between opinion and fact in communicating to his clients. Therefore, he violates the Standards on this basis.




The money manager has done his duty. He has warned the client of the risk and made no explicit promises concerning what he can and cannot do.



Your answer: A was incorrect. The correct answer was C) remand a percentage (to be determined by the employee and employer) of the income earned back to the employer.

The member is obligated to get permission from his employer if he will be in any way competing with his current employer. They must provide notification to their employer describing the types of services to be rendered, the expected duration, and compensation for the services.



Your answer: B was incorrect. The correct answer was A) a violation of Standard III(C), Suitability.

According to Standard III(C), the analyst must consider the appropriateness and suitability of an investment recommendation for each portfolio or client. Having a fixed policy of adding investments to portfolios without evaluating their suitability is a violation of Standard III(C). The action does not violate Standard III(B)



Your answer: A was incorrect. The correct answer was C) Soprano is violating the Standards by not disclosing the fundamental research aspect of the investment process.

Soprano is violating the Standard on portfolio investment recommendations and actions by excluding relevant factors of the investment process. The fundamental research aspect is highly relevant to the process and should be disclosed to clients. It is acceptable for Melfi to use two investment processes that may be in conflict with each other and to use a process that was not developed by her.



Your answer: B was incorrect. The correct answer was C) a violation of the Standard concerning appropriateness and suitability of investment actions.

Given the variety of accounts under her supervision, it is not likely the shares of a speculative biotech firm would be suitable for all accounts. Placing such shares in all accounts indicates that she has failed to consider the appropriateness and suitability of the investment for each account, and this places her in violation of Standard III(C).



Your answer: A was incorrect. The correct answer was C) require Walker to update the data regularly.

According to Standard III(C), Suitability, Members and Candidates must reassess client information and update regularly.


Question 38 - #126952

Your answer: B was incorrect. The correct answer was A) Private equity and real estate.

The GIPS standards do not address performance measurement or coverage of all asset classes, but sections 6, 7 and 8 are supplemental provisions which must be specifically applied to private equity, real estate, and wrap fee/separately managed account (SMA) portfolios.

This question tested from Session 1, Reading 4, LOS d.


Your answer: A was incorrect. The correct answer was C) has violated CFA Institute Standards of Professional Conduct because she did not have a reasonable and adequate basis for making this recommendation.

Analysts are required to have a reasonable and adequate basis, supported by appropriate research and investigation, for their recommendations.



Your answer: C was incorrect. The correct answer was B) exploiting differences in market inefficiencies.

Standard II(B) Market Manipulation prohibits practices that distort prices or artificially inflate trading volumes with the intent to mislead market participants. The Standard is not intended to prohibit legitimate trading strategies that exploit differences in market inefficiencies.

This question tested from Session 1, Reading 2-II, LOS B..

Question 41 - #126953


"Implementation" is not a name of one of the nine major sections of the GIPS standards.

This question tested from Session 1, Reading 4, LOS d.



There is no violation if the opinion is based upon the factual information gathered and the firmâ€™s actual capabilities. This is true whether or not the representation was written, oral, or electronic. None of the other choices are correct.

This question tested from Session 1, Reading 2-I, LOS C..

Question 43 - #127416


Dalby is in violation of Standard IV(B) "Additional Compensation Arrangements." Nonmonetary compensation may still create a conflict of interest.

This question tested from Session 1, Reading 2-IV, LOS B..


Your answer: B was incorrect. The correct answer was A) inform her supervisor that she cannot work on the portfolio because of a legal agreement, but cannot tell him why.

Jason must inform her supervisor of the conflict, but she cannot violate the terms of the confidentiality agreement and she cannot work on the portfolio.



Your answer: A was incorrect. The correct answer was C) when applicable local laws or regulations conflict with the GIPS, in which case, firms must comply with local laws and fully disclose the conflict.

In the case of a conflict, GIPS require that firms comply with local or country-specific laws or regulations rather than GIPS, but must fully disclose the nature and scope of the conflict.

This question tested from Session 1, Reading 4, LOS c.


Your answer: B was incorrect. The correct answer was C) Standard VI(A), Disclosure of Conflicts, and III(C), Suitability.

Mack is obliged to disclose the conflict of interest regarding her companyâ€™s IPO and to consider both the appropriateness and the suitability of the investment for her client. She has apparently failed in both respects.




Both of these are explicitly required by Standard V(A).




Abbott violated Standard V(A), Diligence and Reasonable Basis, because she did not have a reasonable and adequate basis to support the $1.10 EPS without further investigation. By including the $1.10 EPS in her report, she did not exercise diligence and thoroughness to ensure that any research report finding is accurate. If Abbott suspects that any information in a source is not accurate, she should refrain from relying on that information. Abbott did not violate Standard I(B), Independence and Objectivity, because the gift from Carter was merely a token item.



Your answer: A was incorrect. The correct answer was B) Yes, because he undertook an independent practice that could result in compensation or other benefit to him.

Standard IV(A) does not preclude providing independent services for compensation while still employed; however, notification to the employer is required describing the type of service, the expected duration, and the compensation. Compensation includes more than just monetary benefits.



Your answer: C was incorrect. The correct answer was B) must cease distributing the cards with the CFA designation, but can continue to use the existing promotional materials.

Use of the CFA designation must be stopped immediately, however, the receipt of the Charter is a matter of fact.



Your answer: B was incorrect. The correct answer was A) Only one of these purchases violates the Standard.

Using soft dollars for the purchase of office furniture does not benefit clients and is a violation. Purchasing research reports with soft dollars is not a violation, but the advisor should ensure that research purchased with client brokerage will benefit her clients.

This question tested from Session 1, Reading 2-III, LOS A..


Your answer: A was incorrect. The correct answer was C) for neither of the reasons listed.

According to Standard III(E), Preservation of Confidentiality, Stiles may not withhold information under any of the listed reasons. The reason is that CFA Institute will keep the information confidential.

This question tested from Session 1, Reading 2-III, LOS E..


Your answer: C was incorrect. The correct answer was A) as soon as the information is disseminated to all clients.

Family accounts that are client accounts should be treated like any other firm account and should neither be given special treatment nor be disadvantaged because of an existing family relationship with the member or candidate. Members or candidates may undertake transactions in accounts for which they are a beneficial owner only after their clients and employers have had adequate opportunity to act on the recommendation. Personal transactions include those made for the member or candidate's own account, for family (including spouse, children, and other immediate family members) accounts, and for accounts in which the member or candidate has a direct or indirect pecuniary interest, such as a trust or retirement account. It could be argued that Rock is a beneficial owner of his wife's account and the reason why his wife's account should be treated like any other client account is because it does not state that Rock makes the trades in his wife's account. From that we are to infer that another person other than Rock is managing his wife's account thus she should be treated like any other client.

This question tested from Session 1, Reading 2-VI, LOS B..


Your answer: A was incorrect. The correct answer was B) provided that the analyst has a reasonable basis for his or her actions.

According to Standard V(B), the analyst must use reasonable judgment in identifying relevant factors when communicating with clients and prospects . The Mosaic theory does not apply here.

This question tested from Session 1, Reading 2-V, LOS B..



Election of internal auditors is not a major proxy issue.




The use of security analysis combined with nonmaterial nonpublic information to arrive at significant conclusions is legal and is called the mosaic theory.



Your answer: A was incorrect. The correct answer was C) Yes, because he uses CFA as a noun.

The initials CFA cannot be used as a noun. The initials can appear on a business card but cannot be used to exaggerate the meaning or implications of membership.

This question tested from Session 1, Reading 2-VII, LOS B..


Your answer: B was incorrect. The correct answer was A) violating the standard by either showing the pre-release version to his intern or sending it to his brother.

Standard II(A), Material Nonpublic Information, says that a member must be careful about handling material non-public information. As a member of CFA Institute, the CFO must limit the people who see important information before it is released. It would not be appropriate to involve an intern or a relative in the process.

This question tested from Session 1, Reading 2-II, LOS A..

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Respuesta de Etica