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"Diligence and Reasonable Basis"M&Cs must: 1. Exercise diligence,
independence and thoroughness in analyzing investments, making
investment recommendations and taking investment actions. 2. Have a
reasonable and adequate basis, supported by appropriate research and
investigation, for any investment analysis, recommendation or action.
Any service currently available (for remuneration) at the individual's
firm. Thus, if a CFA member is employed at an investment advisor and is
hired to write the ethics section of a CFA Level I study guide, he or
she would not be violating Standard IV-A, since his or her employer does
not publish CFA study guides
"Performance Presentation"When communicating investment performance
information, Members or Candidates must make reasonable efforts to
ensure the information is fair, accurate and complete
"Loyalty"In matters related to their employment, M&Cs must act for
the benefit of their employer and not deprive their employer of the
advantage of their skills and abilities, divulge confidential
information, or otherwise cause harm to their employer.
There are three subsections:IV-A: LoyaltyIV-B: Additional Compensation ArrangementsIV-C: Responsibilities of Supervisors
Plagiarism:•Putting your name on another analyst's research report.
•Including a large portion of another analyst's report in your own
(either verbatim or with slight modifications) without crediting the
original author. •Neglecting to specifically give credit to a person who
has been quoted. For example, saying "a top analyst in the field
suggests..." would be a violation. •When including financial data, you
neglect to include any caveats that must be included with that data.
Although this is not plagiaris
"Additional Compensation Arrangements"M&Cs must not accept gifts,
benefits, compensation or consideration that competes with, or might
reasonably be expected to create a conflict of interest with, their
employer's interest unless they obtain written consent from all parties
involved
The term "research report", as it applies to this Standard, is very
broad and covers much more than the traditional research reports as
defined above.For example, any form of communication can potentially
apply, including (but not limited to):•face-to-face recommendation
•speech or panel discussion •telephone conversation •TV appearance
•internet webcast or blog
"Material Nonpublic Information"M&C who possess material nonpublic
information that could affect the value of an investment must not act
or cause others to act on the information.
Questions regarding procedure on the exam may test Standard IV-C. If
it comes up, remember two simple questions that will help in designing
an effective compliance program:1.Which violations in particular are
most likely to occur?2.What rules will best uncover and prevent these
violations?Designating a compliance officer, as well as making a
compliance manual available to the organization are effective methods in
ensuring the organization has a system of checks and balances. There
should be an educational p
This means the information would be considered relevant to an investor
who is considering investing in this stock, or to a current shareholder
wishing to sell. If a stock reflects all public information, does
adding this new information significantly alter the perception of that
stock? The source of the information also impacts its materiality.
Overhearing a CEO on the train (material) versus your dentist sharing
their opinion (non-material).
"NO Misrepresentation"M&C must not knowingly make any
misrepresentations relating to investment analysis, recommendations,
actions, or other professional activities.
Establish a compliance program that sets out rules of conduct for
those engaged in market transactions, as well as a set of rules
governing any activities that involve the distribution or promotion of
information on a publicly-traded company.
Responsibilities as a CFA Institute Member or CFA CandidateA) Conduct
as M&Cs in the CFA ProgramB) Reference to CFA Institute, membership,
the CFA designation, or candidacy in the CFA program. Must not
misrepresent or exaggerate the meaning or implication of membership in
the CFA Institute.
"Independence & Objectivity: maintain integrity and avoid
conflicts of interest"M&C must use reasonable care and judgment to
achieve and maintain independence and objectivity in their professional
activities. M&C must not offer, solicit, or accept any gift,
benefit, compensation, or consideration that reasonably could be
expected to compromise their own or another's independence and
objectivity.
M&Cs must make reasonable efforts to detect and prevent violations
of applicable laws, rules, regulations, and the Code and Standards by
anyone subject to their supervision or authority.
Are opinions and projections separated from factual information? In
the gathering of information on a company, has this information been
reviewed for accuracy by a representative of that company?Has a
newsletter or watch list omitted too much relevant information?Has a
research report adequately outlined the risk factors, or failed to
analyze less optimistic scenarios?Does a research report omit the
analyst's real reason for making a specific recommendation?
"Knowledge of the Law: covers laws, rules and regulations" M&C
must understand and comply with all applicable laws, rules, and
regulations (including the CFA Institute Code of Ethics and Standards of
Professional Conduct) of any govt, regulatory organization, licensing
agency, or professional association governing their professional
activities. In the event of conflict, M&C must comply with the more
strict law, rule or regulation. M&C must not knowingly participate
or assist in and must disassociate from an
"Market Manipulation": M&C must not engage in practices that
distort prices or artificially inflate trading volume with the intent to
mislead market participants.
"Loyalty, Prudence and Care" -Manage portfolio like it was your own
moneyM&Cs have a duty of loyalty to their clients and must act with
reasonable care and exercise prudent judgment. M&Cs must act for the
benefit of their clients and place their clients' interests before
their employer's or their own interests. In relationships with clients,
M&Cs must determine applicable fiduciary duty and must comply with
such duty to persons and interests to whom it is owed.
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