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【单选】
Centurion Rivals (CR), an investment advisory firm, receives the following services in return for directing client brokerage to another firm:
Research reports supporting trades surrounding IPOs, mergers, and bankruptcy proceedings.
Access to an online database to track current, former, and prospective clients for marketing purposes.
CR wants to advertise that it is in compliance with CFA Institute’s soft dollar standards. CR should:
A. determine whether its policies are in compliance using CFA Institute’s 3-tiered analysis.
B. advertise compliance until notified by CFA Institute of a violation.
C. advertise partial compliance based on the differing treatment between the research reports and the online marketing database.
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【单选】
Steve Bishop is a portfolio manager with Bradshaw Asset Management. He has received a request from the Gail Foundation, one of his clients, to review Bradshaw's soft dollar policy, since Bradshaw claims to comply with the CFA Institute Soft Dollar Standards. Bishop must be prepared to present the client with all of the following EXCEPT:
A. the aggregate percentage on Bradshaw's brokerage derived through client-directed brokerage.
B. the total amount of Gail's commissions generated through soft dollar arrangements.
C. the total amount of brokerage paid by Bradshaw to each broker.
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【单选】
Liz Davis is a portfolio manager for a firm that claims it is in compliance with CFA Institute Soft Dollar Standards. In purchasing bonds for the account of the pension fund of Richards Company, no commissions were paid but there was a spread charged by the broker between the purchase and sale price of the bonds. The brokerage on the trade is not governed by any securities regulation. The specific brokerage from the trade:
A. cannot be used to benefit any other client.
B. can be used to benefit another client as long as Richards benefits from other the client’s brokerage in the future.
C. can be used to benefit another client as long as Davis receives prior consent from Richards.
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【单选】
Rochelle Bell is the Chief Investment Officer at a money management company that claims it is in compliance with CFA Institute Soft Dollar Standards. Last year the company had $10 million of soft dollar funds accruing from commissions available but only spent $8 million on research services. This year Bell estimates that the company will have $11 million of soft dollar funds available. Bell analyzes the research services that the firm wishes to purchase and places them into four categories: fully available for soft dollars, mixed usage, not available for soft dollars, and cannot be determined. The total of soft dollars allocated to the first two groups is $7 million, and there are $500,000 of expenditures in the group for which she cannot determine whether they are suitable for soft dollar expenditures. Bell should:
A. allocate $500,000 of this year's soft dollars to this last group.
B. not allocate any of the soft dollars to this last group.
C. use the 50-50 rule and allocate $250,000 of soft dollars to this last group.
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【单选】
Elaine Black, CFA has recently been hired as the Chief Investment Officer at a money management company that does not claim it is in compliance with CFA Institute Soft Dollar Standards. Her former company was in compliance. Which of the following statements concerning CFA Institute Soft Dollar Standards is CORRECT? Black:
A. cannot use soft dollars to pay for research services except when the commissions originate from principle trades.
B. must abide by the conditions set forth in the Standards of Professional Conduct concerning soft dollars and can chose to accept some of the CFA Institute Soft Dollar Standards.
C. must ignore all provisions set forth in the CFA Institute Soft Dollar Standards except when they are consistent with the Standards of Professional Conduct.
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【单选】
Scott Burroughs is a portfolio manager for a firm that claims it is in compliance with CFA Institute Soft Dollar Standards. In purchasing bonds for the account of the pension fund of Sheets Company, no commissions were paid, but there was a spread charged by the broker between the purchase and sale price of the bonds. The trade is governed by the Investment Company Act of 1940 which requires that the trade must benefit only the client. Which of the following statements regarding client brokerage is CORRECT? The specific brokerage from the trade:
A. can be used to benefit another client only if Burroughs receives prior consent from Sheets.
B. cannot be used to benefit any other client.
C. can be used to benefit another client as long as Sheets benefits from the other client's brokerage in the future.
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【单选】
Milton Baker, CFA, prepares a research report on the dynamics of a stock price. In his study, he uses a considerable number of information sources, both outside sources and his company’s own research papers, prepared for both internal and public use. The report will first be distributed at the monthly department meeting and then later will be published on the company’s Internet site. He thinks that he may have neglected to mention some of his sources in his reference list but decides that he needs to be concerned about full disclosure of his sources only for the public version of the report, so he will wait to revise his work until after the monthly meeting but before it is published on the internet site. Which Standards does Baker NOT comply with?
A. Standard I(C), Misrepresentation, I(B), Independence and Objectivity, and I(A), Knowledge of the Law.
B. Standard I(C), Misrepresentation, only.
C. Standard I(C), Misrepresentation, and I(A), Knowledge of the Law.
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【单选】Questions 1 through 6 relate to Ethical and Professional Standards.
Jake Schmidt Case Scenario
Jake Schmidt, CFA, has worked as a separate accounts manager at Bremen Investment Advisors, a large national asset management firm, for the past 10 years. Bremen offers separately managed accounts that meet the needs of its institutional and individual investors; each separate account is tailored to the client's objectives, risk tolerances, and tax situation.
Schmidt manages portfolios for a broad range of clients, from individual investors to large institutional investors. Several of his largest clients have sufficiently large portfolios that when trades are placed they will often move share prices. In order to avoid negatively impacting his smallest clients, when he trades a particular security for a number of different accounts, Schmidt executes trades in increasing order of size: trades are executed for the smallest accounts first, and the largest institutional investors last.
Schmidt sometimes receives an allocation of oversubscribed initial public offering shares, though often he does not receive enough shares to allow all eligible clients to participate. Rather than distributing an equal number of shares to each client, Schmidt’s procedures result in the eligible client with the largest portfolio receiving the greatest number of shares, while smaller clients receive proportionally fewer shares.
Schmidt provides portfolio performance information to his clients only quarterly. However, for clients who pay an additional annual fee, Schmidt provides monthly performance reports. Schmidt commits to all customers that they will receive performance reports "2 to 3 weeks after the end of the period."
New client DeShawn Jackson contacts Bremen to open an account. Schmidt agrees to manage this account, which represents about one-fifth of Jackson’s total wealth. As part of the IPS process, Schmidt asks Jackson to disclose details of Jackson's personal financial situation; particularly allocations and balances of investments held with other asset managers. Schmidt proposes to Jackson that the two have a conference call at the beginning of each February to review Jackson’s IPS.
Schmidt takes on Jackson, with a mandate to invest in the common stock of U.S. companies. Schmidt initially invests most of the value of the account in stocks in shares of companies in the basic materials sector. However, at the beginning of the next quarter Schmidt’s research about the prospects of basic materials stocks makes him nervous and he reallocates the majority of the portfolio to shares in consumer staples companies. Unfortunately, basic materials stocks perform strongly for the remainder of the quarter, while consumer staples sag, resulting in the account suffering a 2% loss for the quarter. When Jackson notices the shift in sector holdings in his statements at the end of the quarter, he is upset that his portfolio missed the run-up in prices in the basic materials sector.
In order to give clients additional confidence, Schmidt decides to have the portfolio information that he provides to clients reviewed on a regular basis for accuracy and completeness. Rather than hiring staff, Schmidt outsources this function to an outside organization.
One of Schmidt’s largest clients, Kiara Williams, has asked Schmidt to sell a very large block of her share holdings in Alpha Corporation, a small niche firm in the biotech industry. Schmidt refrains from initiating sales of Alpha Corporation stock for his other clients. However, he starts to feel downbeat about the prospects of stock of other firms in this niche. He subsequently decides to sell some other clients’ holdings in Beta Company which Williams does not own and other than being in the same biotech niche, Alpha Corporation and Beta Company are entirely unrelated.
Are Schmidt’s actions and procedures related to the order in which he executes trades and the manner in which he allocates oversubscribed IPO shares in compliance with the recommendations and requirements of the Asset Manager Code of Professional Conduct?
A. Yes.
B. No, with respect to his trade execution policy.
C. No, with respect to his IPO allocation policy.
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【单选】Jake Schmidt Case Scenario
Jake Schmidt, CFA, has worked as a separate accounts manager at Bremen Investment Advisors, a large national asset management firm, for the past 10 years. Bremen offers separately managed accounts that meet the needs of its institutional and individual investors; each separate account is tailored to the client's objectives, risk tolerances, and tax situation.
Schmidt manages portfolios for a broad range of clients, from individual investors to large institutional investors. Several of his largest clients have sufficiently large portfolios that when trades are placed they will often move share prices. In order to avoid negatively impacting his smallest clients, when he trades a particular security for a number of different accounts, Schmidt executes trades in increasing order of size: trades are executed for the smallest accounts first, and the largest institutional investors last.
Schmidt sometimes receives an allocation of oversubscribed initial public offering shares, though often he does not receive enough shares to allow all eligible clients to participate. Rather than distributing an equal number of shares to each client, Schmidt’s procedures result in the eligible client with the largest portfolio receiving the greatest number of shares, while smaller clients receive proportionally fewer shares.
Schmidt provides portfolio performance information to his clients only quarterly. However, for clients who pay an additional annual fee, Schmidt provides monthly performance reports. Schmidt commits to all customers that they will receive performance reports "2 to 3 weeks after the end of the period."
New client DeShawn Jackson contacts Bremen to open an account. Schmidt agrees to manage this account, which represents about one-fifth of Jackson’s total wealth. As part of the IPS process, Schmidt asks Jackson to disclose details of Jackson's personal financial situation; particularly allocations and balances of investments held with other asset managers. Schmidt proposes to Jackson that the two have a conference call at the beginning of each February to review Jackson’s IPS.
Schmidt takes on Jackson, with a mandate to invest in the common stock of U.S. companies. Schmidt initially invests most of the value of the account in stocks in shares of companies in the basic materials sector. However, at the beginning of the next quarter Schmidt’s research about the prospects of basic materials stocks makes him nervous and he reallocates the majority of the portfolio to shares in consumer staples companies. Unfortunately, basic materials stocks perform strongly for the remainder of the quarter, while consumer staples sag, resulting in the account suffering a 2% loss for the quarter. When Jackson notices the shift in sector holdings in his statements at the end of the quarter, he is upset that his portfolio missed the run-up in prices in the basic materials sector.
In order to give clients additional confidence, Schmidt decides to have the portfolio information that he provides to clients reviewed on a regular basis for accuracy and completeness. Rather than hiring staff, Schmidt outsources this function to an outside organization.
One of Schmidt’s largest clients, Kiara Williams, has asked Schmidt to sell a very large block of her share holdings in Alpha Corporation, a small niche firm in the biotech industry. Schmidt refrains from initiating sales of Alpha Corporation stock for his other clients. However, he starts to feel downbeat about the prospects of stock of other firms in this niche. He subsequently decides to sell some other clients’ holdings in Beta Company which Williams does not own and other than being in the same biotech niche, Alpha Corporation and Beta Company are entirely unrelated.
Are Schmidt’s actions and procedures related to changing the allocation of DeShawn Jackson’s portfolio and notifying his client about the change, in compliance with the Asset Manager Code of Professional Conduct?
A. No, with respect to changing the allocation of the portfolio.
B. Yes.
C. No, with respect to the timing of the notification of changes.
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【单选】Mike Lang Case Scenario
It is Jan. 29, 2010, and Mike Lang, CFA, is in trouble. Lang manages discretionary accounts for Welshire Capital, a large money management firm in New York. Lang has had some problems with the account of Carol Damon, the widow of a prominent banker who left her a sizable estate.
Damon, age 80, has little tolerance for volatility and does not like to invest in small-cap stocks. However, if her portfolio fails to advance at least 10% in a given year, she calls Lang and yells at him, then writes complaint letters to various Welshire Capital officers. Damon’s complaint letters usually end up on the desk of Cynthia Silk, CFA, senior portfolio manager for Stonebridge, who oversees the work of Lang and a dozen other money managers.
Last year, Damon’s portfolio lost 25% for the year, versus a 38% decline for the S&P 500 Index, the benchmark Welshire Capital uses for all of its portfolios. Lang tried to explain to Damon that the market had an extremely bad year, and the portfolio beat the benchmark by a wide margin in large measure because Lang primarily selected large-cap stocks for Damon’s portfolio that outperformed the market. Damon said that she did not care to listen to these excuses and was not concerned about the market return, only her portfolio’s return.
The most recent complaint letter was particularly ruthless, with Damon calling into question Lang’s competence and threatening to move her account to another firm. Damon, long-time president of the Nassau County Council, further vowed to persuade four local businessmen to move their accounts as well. In total, Damon and the businessmen she plans to influence represent more than 20% of Welshire Capital’s assets under management.
In an effort to fix his relationship with Damon, Lang decides to take four actions:
Set up a meeting at Damon’s home, at which time he will explain how important her business is to Welshire Capital and discuss changes to her investment policy statement.
Prepare quarterly and annual reports that include the rationale for purchasing each stock and the performance of her portfolio relative to those of his other clients.
Defend himself against her attack on his competence by discussing the grueling studies and difficult examinations required to earn the CFA charter.
Explain to her that despite the fact that two of the mutual funds in her portfolio pay referral fees to Stonebridge, he feels both funds are excellent investments.
Lang further decides to begin using a different benchmark for Damon’s portfolio, one that better reflects the nature of the investments in the portfolio and creates a more accurate perception of portfolio performance.
While Lang is moving to sort out his differences with Damon, Silk, his supervisor, takes action of a different sort. Silk serves with Damon on the Nassau County Council, which takes up a considerable amount of Silk’s time, and considers Damon to be a personal friend. She also knows about Damon’s volatile temper and irrational expectations. She has historically tried to resolve any animosity Damon has towards Lang.
This time, Silk is concerned that Damon will make good on her threat to take business away from Stonebridge. In a phone call to Damon, Silk says she understands Damon’s unhappiness with the poor performance and promises to discuss the situation with Lang and take appropriate action if necessary. She also promises Damon shares on a pro rata basis in an upcoming equity offering the company is handling assuming the stock is suitable for Damon’s portfolio.
Later that day, Silk reviews transactions in Damon’s portfolio and determines that Lang’s poor asset allocation reduced the portfolio’s returns by a considerable amount. She then calls Lang into her office. During that closed-door meeting, Silk criticizes Lang’s handling of the portfolio and tells him she is giving the portfolio to another analyst with more experience. Before dismissing Lang, she calls the other analyst, John Van Zant, and tells him that he will be taking over Damon’s portfolio immediately, adding the warning that if the portfolio does not perform better, Van Zant will not get his bonus this year.
With regard to her meeting with Lang, Silk:
A. violated the Code and Standards when she threatened Van Zant.
B. did not violate the Code and Standards.
C. violated the Code and Standards when she criticized his management of Damon’s portfolio.
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【单选】
Marc Feldman, CFA, is manager of corporate investor relations for a high-tech startup, zippy.com, in Boise, Idaho. Feldman is well-known in the high tech community in Boise, and Dragon.com has asked if he will help them organize their investor relations function on a consulting basis. They offer him an all-expenses-paid two-week holiday for two on Australia's Gold Coast in payment. Regarding this offer as a CFA Institute member Feldman is:
A. allowed to accept the offer only with written approval from zippy and from Dragon.
B. allowed to accept the offer only with written approval from zippy.
C. not allowed to accept such an offer since it effectively places him in competition with his employer.
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【单选】Mike Lang Case Scenario
It is Jan. 29, 2010, and Mike Lang, CFA, is in trouble. Lang manages discretionary accounts for Welshire Capital, a large money management firm in New York. Lang has had some problems with the account of Carol Damon, the widow of a prominent banker who left her a sizable estate.
Damon, age 80, has little tolerance for volatility and does not like to invest in small-cap stocks. However, if her portfolio fails to advance at least 10% in a given year, she calls Lang and yells at him, then writes complaint letters to various Welshire Capital officers. Damon’s complaint letters usually end up on the desk of Cynthia Silk, CFA, senior portfolio manager for Stonebridge, who oversees the work of Lang and a dozen other money managers.
Last year, Damon’s portfolio lost 25% for the year, versus a 38% decline for the S&P 500 Index, the benchmark Welshire Capital uses for all of its portfolios. Lang tried to explain to Damon that the market had an extremely bad year, and the portfolio beat the benchmark by a wide margin in large measure because Lang primarily selected large-cap stocks for Damon’s portfolio that outperformed the market. Damon said that she did not care to listen to these excuses and was not concerned about the market return, only her portfolio’s return.
The most recent complaint letter was particularly ruthless, with Damon calling into question Lang’s competence and threatening to move her account to another firm. Damon, long-time president of the Nassau County Council, further vowed to persuade four local businessmen to move their accounts as well. In total, Damon and the businessmen she plans to influence represent more than 20% of Welshire Capital’s assets under management.
In an effort to fix his relationship with Damon, Lang decides to take four actions:
Set up a meeting at Damon’s home, at which time he will explain how important her business is to Welshire Capital and discuss changes to her investment policy statement.
Prepare quarterly and annual reports that include the rationale for purchasing each stock and the performance of her portfolio relative to those of his other clients.
Defend himself against her attack on his competence by discussing the grueling studies and difficult examinations required to earn the CFA charter.
Explain to her that despite the fact that two of the mutual funds in her portfolio pay referral fees to Stonebridge, he feels both funds are excellent investments.
Lang further decides to begin using a different benchmark for Damon’s portfolio, one that better reflects the nature of the investments in the portfolio and creates a more accurate perception of portfolio performance.
While Lang is moving to sort out his differences with Damon, Silk, his supervisor, takes action of a different sort. Silk serves with Damon on the Nassau County Council, which takes up a considerable amount of Silk’s time, and considers Damon to be a personal friend. She also knows about Damon’s volatile temper and irrational expectations. She has historically tried to resolve any animosity Damon has towards Lang.
This time, Silk is concerned that Damon will make good on her threat to take business away from Stonebridge. In a phone call to Damon, Silk says she understands Damon’s unhappiness with the poor performance and promises to discuss the situation with Lang and take appropriate action if necessary. She also promises Damon shares on a pro rata basis in an upcoming equity offering the company is handling assuming the stock is suitable for Damon’s portfolio.
Later that day, Silk reviews transactions in Damon’s portfolio and determines that Lang’s poor asset allocation reduced the portfolio’s returns by a considerable amount. She then calls Lang into her office. During that closed-door meeting, Silk criticizes Lang’s handling of the portfolio and tells him she is giving the portfolio to another analyst with more experience. Before dismissing Lang, she calls the other analyst, John Van Zant, and tells him that he will be taking over Damon’s portfolio immediately, adding the warning that if the portfolio does not perform better, Van Zant will not get his bonus this year.
Silk’s service on the Nassau County Council is most likely to violate:
A. Standard III(B) Fair Dealing.
B. Standard IV(B) Additional Compensation Arrangements.
C. Standard IV(A) Loyalty.
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【单选】
Marc Feldman, a CFA Institute member, is treasurer of zippy.com, and is also Larry Goldman's boss. Feldman is informed of "accounting irregularities of an unknown origin" during an audit by zippy's external accounting firm. There are 3 individuals, including Goldman, handling the accounting function. According to the Code and Standards, Feldman should do all of the following EXCEPT:
A. terminate the accounting staff immediately and issue a press release describing the situation.
B. conduct a thorough investigation of activities.
C. leave the staff in their current jobs and increase supervision while the external auditors complete their work.
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【单选】
Harold Klein, CFA, is an expert on ethical conduct in the investment banking industry and has been asked by an association of investment bankers to give a presentation on interpreting codes of ethics and standards of practice such as the CFA Institute Code of Ethics and Standards of Professional Conduct. In his presentation, Klein makes two key points:
Sound ethical judgment requires careful and thoughtful application of ethical standards which are precise and exacting in nature
An ethical professional must begin the ethical decision making process by determining the applicable code and standards that govern the situation.
Determine whether Klein’s statements are correct or incorrect and state your conclusion.
Statement 1
Statement 2
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【单选】Jake Schmidt Case Scenario
Jake Schmidt, CFA, has worked as a separate accounts manager at Bremen Investment Advisors, a large national asset management firm, for the past 10 years. Bremen offers separately managed accounts that meet the needs of its institutional and individual investors; each separate account is tailored to the client's objectives, risk tolerances, and tax situation.
Schmidt manages portfolios for a broad range of clients, from individual investors to large institutional investors. Several of his largest clients have sufficiently large portfolios that when trades are placed they will often move share prices. In order to avoid negatively impacting his smallest clients, when he trades a particular security for a number of different accounts, Schmidt executes trades in increasing order of size: trades are executed for the smallest accounts first, and the largest institutional investors last.
Schmidt sometimes receives an allocation of oversubscribed initial public offering shares, though often he does not receive enough shares to allow all eligible clients to participate. Rather than distributing an equal number of shares to each client, Schmidt’s procedures result in the eligible client with the largest portfolio receiving the greatest number of shares, while smaller clients receive proportionally fewer shares.
Schmidt provides portfolio performance information to his clients only quarterly. However, for clients who pay an additional annual fee, Schmidt provides monthly performance reports. Schmidt commits to all customers that they will receive performance reports "2 to 3 weeks after the end of the period."
New client DeShawn Jackson contacts Bremen to open an account. Schmidt agrees to manage this account, which represents about one-fifth of Jackson’s total wealth. As part of the IPS process, Schmidt asks Jackson to disclose details of Jackson's personal financial situation; particularly allocations and balances of investments held with other asset managers. Schmidt proposes to Jackson that the two have a conference call at the beginning of each February to review Jackson’s IPS.
Schmidt takes on Jackson, with a mandate to invest in the common stock of U.S. companies. Schmidt initially invests most of the value of the account in stocks in shares of companies in the basic materials sector. However, at the beginning of the next quarter Schmidt’s research about the prospects of basic materials stocks makes him nervous and he reallocates the majority of the portfolio to shares in consumer staples companies. Unfortunately, basic materials stocks perform strongly for the remainder of the quarter, while consumer staples sag, resulting in the account suffering a 2% loss for the quarter. When Jackson notices the shift in sector holdings in his statements at the end of the quarter, he is upset that his portfolio missed the run-up in prices in the basic materials sector.
In order to give clients additional confidence, Schmidt decides to have the portfolio information that he provides to clients reviewed on a regular basis for accuracy and completeness. Rather than hiring staff, Schmidt outsources this function to an outside organization.
One of Schmidt’s largest clients, Kiara Williams, has asked Schmidt to sell a very large block of her share holdings in Alpha Corporation, a small niche firm in the biotech industry. Schmidt refrains from initiating sales of Alpha Corporation stock for his other clients. However, he starts to feel downbeat about the prospects of stock of other firms in this niche. He subsequently decides to sell some other clients’ holdings in Beta Company which Williams does not own and other than being in the same biotech niche, Alpha Corporation and Beta Company are entirely unrelated.
Are Schmidt’s actions related to the creation and review of DeShawn Jackson’s IPS in compliance with the recommendations and requirements of the Asset Manager Code of Professional Conduct?
A. No, with respect to the frequency of reviewing the IPS with Jackson.
B. No, with respect to his request for Jackson to disclose assets held with other managers.
C. Yes.
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【单选】Jake Schmidt Case Scenario
Jake Schmidt, CFA, has worked as a separate accounts manager at Bremen Investment Advisors, a large national asset management firm, for the past 10 years. Bremen offers separately managed accounts that meet the needs of its institutional and individual investors; each separate account is tailored to the client's objectives, risk tolerances, and tax situation.
Schmidt manages portfolios for a broad range of clients, from individual investors to large institutional investors. Several of his largest clients have sufficiently large portfolios that when trades are placed they will often move share prices. In order to avoid negatively impacting his smallest clients, when he trades a particular security for a number of different accounts, Schmidt executes trades in increasing order of size: trades are executed for the smallest accounts first, and the largest institutional investors last.
Schmidt sometimes receives an allocation of oversubscribed initial public offering shares, though often he does not receive enough shares to allow all eligible clients to participate. Rather than distributing an equal number of shares to each client, Schmidt’s procedures result in the eligible client with the largest portfolio receiving the greatest number of shares, while smaller clients receive proportionally fewer shares.
Schmidt provides portfolio performance information to his clients only quarterly. However, for clients who pay an additional annual fee, Schmidt provides monthly performance reports. Schmidt commits to all customers that they will receive performance reports "2 to 3 weeks after the end of the period."
New client DeShawn Jackson contacts Bremen to open an account. Schmidt agrees to manage this account, which represents about one-fifth of Jackson’s total wealth. As part of the IPS process, Schmidt asks Jackson to disclose details of Jackson's personal financial situation; particularly allocations and balances of investments held with other asset managers. Schmidt proposes to Jackson that the two have a conference call at the beginning of each February to review Jackson’s IPS.
Schmidt takes on Jackson, with a mandate to invest in the common stock of U.S. companies. Schmidt initially invests most of the value of the account in stocks in shares of companies in the basic materials sector. However, at the beginning of the next quarter Schmidt’s research about the prospects of basic materials stocks makes him nervous and he reallocates the majority of the portfolio to shares in consumer staples companies. Unfortunately, basic materials stocks perform strongly for the remainder of the quarter, while consumer staples sag, resulting in the account suffering a 2% loss for the quarter. When Jackson notices the shift in sector holdings in his statements at the end of the quarter, he is upset that his portfolio missed the run-up in prices in the basic materials sector.
In order to give clients additional confidence, Schmidt decides to have the portfolio information that he provides to clients reviewed on a regular basis for accuracy and completeness. Rather than hiring staff, Schmidt outsources this function to an outside organization.
One of Schmidt’s largest clients, Kiara Williams, has asked Schmidt to sell a very large block of her share holdings in Alpha Corporation, a small niche firm in the biotech industry. Schmidt refrains from initiating sales of Alpha Corporation stock for his other clients. However, he starts to feel downbeat about the prospects of stock of other firms in this niche. He subsequently decides to sell some other clients’ holdings in Beta Company which Williams does not own and other than being in the same biotech niche, Alpha Corporation and Beta Company are entirely unrelated.
Are Schmidt’s policies related to the timing of disclosure of the performance of clients’ investments in compliance with the recommendations and requirements of the Asset Manager Code of Professional Conduct?
A. No, with respect to reporting "2 to 3 weeks after the end of the period."
B. No, with respect to providing monthly reporting to only one group of clients.
C. Yes.
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【单选】Mike Lang Case Scenario
It is Jan. 29, 2010, and Mike Lang, CFA, is in trouble. Lang manages discretionary accounts for Welshire Capital, a large money management firm in New York. Lang has had some problems with the account of Carol Damon, the widow of a prominent banker who left her a sizable estate.
Damon, age 80, has little tolerance for volatility and does not like to invest in small-cap stocks. However, if her portfolio fails to advance at least 10% in a given year, she calls Lang and yells at him, then writes complaint letters to various Welshire Capital officers. Damon’s complaint letters usually end up on the desk of Cynthia Silk, CFA, senior portfolio manager for Stonebridge, who oversees the work of Lang and a dozen other money managers.
Last year, Damon’s portfolio lost 25% for the year, versus a 38% decline for the S&P 500 Index, the benchmark Welshire Capital uses for all of its portfolios. Lang tried to explain to Damon that the market had an extremely bad year, and the portfolio beat the benchmark by a wide margin in large measure because Lang primarily selected large-cap stocks for Damon’s portfolio that outperformed the market. Damon said that she did not care to listen to these excuses and was not concerned about the market return, only her portfolio’s return.
The most recent complaint letter was particularly ruthless, with Damon calling into question Lang’s competence and threatening to move her account to another firm. Damon, long-time president of the Nassau County Council, further vowed to persuade four local businessmen to move their accounts as well. In total, Damon and the businessmen she plans to influence represent more than 20% of Welshire Capital’s assets under management.
In an effort to fix his relationship with Damon, Lang decides to take four actions:
Set up a meeting at Damon’s home, at which time he will explain how important her business is to Welshire Capital and discuss changes to her investment policy statement.
Prepare quarterly and annual reports that include the rationale for purchasing each stock and the performance of her portfolio relative to those of his other clients.
Defend himself against her attack on his competence by discussing the grueling studies and difficult examinations required to earn the CFA charter.
Explain to her that despite the fact that two of the mutual funds in her portfolio pay referral fees to Stonebridge, he feels both funds are excellent investments.
Lang further decides to begin using a different benchmark for Damon’s portfolio, one that better reflects the nature of the investments in the portfolio and creates a more accurate perception of portfolio performance.
While Lang is moving to sort out his differences with Damon, Silk, his supervisor, takes action of a different sort. Silk serves with Damon on the Nassau County Council, which takes up a considerable amount of Silk’s time, and considers Damon to be a personal friend. She also knows about Damon’s volatile temper and irrational expectations. She has historically tried to resolve any animosity Damon has towards Lang.
This time, Silk is concerned that Damon will make good on her threat to take business away from Stonebridge. In a phone call to Damon, Silk says she understands Damon’s unhappiness with the poor performance and promises to discuss the situation with Lang and take appropriate action if necessary. She also promises Damon shares on a pro rata basis in an upcoming equity offering the company is handling assuming the stock is suitable for Damon’s portfolio.
Later that day, Silk reviews transactions in Damon’s portfolio and determines that Lang’s poor asset allocation reduced the portfolio’s returns by a considerable amount. She then calls Lang into her office. During that closed-door meeting, Silk criticizes Lang’s handling of the portfolio and tells him she is giving the portfolio to another analyst with more experience. Before dismissing Lang, she calls the other analyst, John Van Zant, and tells him that he will be taking over Damon’s portfolio immediately, adding the warning that if the portfolio does not perform better, Van Zant will not get his bonus this year.
In his attempt to appease Damon, Lang would most likely violate the Code and Standards by:
A. defending himself against her attack on his competence by discussing the grueling studies and difficult examinations required to earn the CFA charter.
B. setting up a meeting at Damon’s home, at which he will explain how important her business is to Welshire Capital and discuss changes to her investment policy statement.
C. preparing quarterly and annual reports that include the rationale for purchasing each stock and the performance of her portfolio relative to those of other clients.
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【单选】
Bill Jackson, CFA, has established his own investment management firm. Jackson uses cost-benefit analysis to determine when to vote proxies, and he informs his clients and prospects of this policy. Is Jackson in compliance with the Code and Standards?
A. Yes.
B. No, because this is misconduct.
C. No, because he has violated his duty of loyalty to clients.
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【单选】
Joanna Burgess, CFA, sends all of her investor clients a report which highlights industries the firm’s research department believes will outperform over the next year. She also includes her firm’s recommended list, which contains only the names of the 20 domestic stocks on which the firm has a buy recommendation. With respect to these actions, Burgess has:
A. violated the Standards by not considering suitability for her clients who received the list.
B. not violated the Standards of Practice.
C. violated the Standards by not indicating the basic investment characteristics of the recommended stocks.
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【单选】
Alice Waters, CFA, worked for Gramler Advisors for three years as a research analyst but was recently let go as a result of a company reorganization. During her employment, Waters sometimes worked at home on her own time. Waters uses client names from her files to ask for letters of recommendation and uses some of the reports she wrote as examples of her work for prospective employers. Which of these actions violate the Code and Standards?
A. Both using the client names and research reports without permission from Gramler.
B. Using the research reports without permission from Gramler, but not contacting the clients.
C. Contacting firm clients without permission from Gramler, but not using the research reports as examples of her work.
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【单选】
One week after taking the Level II CFA exam, Mindy Hauser posts a message on a popular web site: "I do not believe CFA Institute tested the curriculum fairly. I was ready to use that neat rule for triangular arbitrage problems, and there weren’t any on the exam." Does Hauser’s message violate the Standards related to conduct as a CFA candidate?
A. No, because expressing an opinion is not a violation.
B. Yes, because it compromises the integrity of the CFA examinations.
C. Yes, because it compromises the reputation of the CFA Institute.
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【单选】
Albert Long, CFA, manages portfolios of high net worth individuals for HKB Corp. Alice Thurmont, one of his close friends, heads a local charity for homeless children that depends on donations to operate. Because donations have declined during the past year, the charity is experiencing financial difficulty. Thurmont asks Long to give her a partial list of his clients so that she can contact them to make tax-deductible donations. Because Long knows that the charity provides much benefit to the community, he provides Thurmont with the requested list.
Betty Short, CFA, also works for HKB Corp. She receives a letter from CFA Institute's Professional Conduct Program (PCP) requesting that she provide information about one of HKB’s clients who is being investigated. Short complies with the request despite the confidential nature of the information requested by the PCP.
Based on Standard III(E), Preservation of Confidentiality, which of the following statements about Long and Short’s actions is CORRECT?
A. Short violated Standard III(E) but Long did not violate Standard III(E).
B. Long violated Standard III(E) but Short did not violate Standard III(E).
C. Both Long and Short violated Standard III(E).
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【单选】
The Konkol Company implements a new methodology for portfolio valuation that is licensed to them by ABC Statistics. Konkol complies with the CFA Institute Code and Standards by:
A. discussing the new methodology with the clients, in its entirety.
B. not discussing the new methodology with clients because there is no need to, as it will not change their risk and yield preferences.
C. discussing the new methodology with clients only when a change in the security selection process is involved.
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【单选】
If the Chief Investment Officer of an investment advisory firm also is a CFA charterholder, which of the following statements is CORRECT?
A. The firm must present an historical composite.
B. All performance results that are presented must comply with the CFA Institute Global Investment Performance Standards.
C. The firm must comply with the CFA Institute Global Investment Performance Standards only if it states that it follows the Standards.
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【单选】
Joey Balder, CFA, an employee of Flagship Investment Managers, is offered a position as Flagship’s Southtown branch supervisor. Balder is reluctant to accept the position because certain compliance procedures have not been adopted in that branch. To comply with the Standards, Balder should most appropriately:
A. accept the position on condition that his concerns will be addressed.
B. discuss his concerns with management and not accept the position unless and until he is given authority over compliance procedures.
C. decline in writing to accept the supervisory position until the firm adopts appropriate procedures.
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【单选】
Marc Feldman, CFA, is manager of corporate investor relations for a high-tech startup, zippy.com, in Boise, Idaho. Feldman learns that Larry Smith, controller, is altering the accounting records. He decides that any ramifications from such activity is Smith's problem and does not report this fact. According to the CFA Institute Code and Standards he should or is required to do all of the following EXCEPT:
A. determine legality, consulting counsel if necessary.
B. report the activity to the FASB or other relevant regulatory body.
C. urge Smith to cease altering the accounting records.
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【单选】Mike Lang Case Scenario
It is Jan. 29, 2010, and Mike Lang, CFA, is in trouble. Lang manages discretionary accounts for Welshire Capital, a large money management firm in New York. Lang has had some problems with the account of Carol Damon, the widow of a prominent banker who left her a sizable estate.
Damon, age 80, has little tolerance for volatility and does not like to invest in small-cap stocks. However, if her portfolio fails to advance at least 10% in a given year, she calls Lang and yells at him, then writes complaint letters to various Welshire Capital officers. Damon’s complaint letters usually end up on the desk of Cynthia Silk, CFA, senior portfolio manager for Stonebridge, who oversees the work of Lang and a dozen other money managers.
Last year, Damon’s portfolio lost 25% for the year, versus a 38% decline for the S&P 500 Index, the benchmark Welshire Capital uses for all of its portfolios. Lang tried to explain to Damon that the market had an extremely bad year, and the portfolio beat the benchmark by a wide margin in large measure because Lang primarily selected large-cap stocks for Damon’s portfolio that outperformed the market. Damon said that she did not care to listen to these excuses and was not concerned about the market return, only her portfolio’s return.
The most recent complaint letter was particularly ruthless, with Damon calling into question Lang’s competence and threatening to move her account to another firm. Damon, long-time president of the Nassau County Council, further vowed to persuade four local businessmen to move their accounts as well. In total, Damon and the businessmen she plans to influence represent more than 20% of Welshire Capital’s assets under management.
In an effort to fix his relationship with Damon, Lang decides to take four actions:
Set up a meeting at Damon’s home, at which time he will explain how important her business is to Welshire Capital and discuss changes to her investment policy statement.
Prepare quarterly and annual reports that include the rationale for purchasing each stock and the performance of her portfolio relative to those of his other clients.
Defend himself against her attack on his competence by discussing the grueling studies and difficult examinations required to earn the CFA charter.
Explain to her that despite the fact that two of the mutual funds in her portfolio pay referral fees to Stonebridge, he feels both funds are excellent investments.
Lang further decides to begin using a different benchmark for Damon’s portfolio, one that better reflects the nature of the investments in the portfolio and creates a more accurate perception of portfolio performance.
While Lang is moving to sort out his differences with Damon, Silk, his supervisor, takes action of a different sort. Silk serves with Damon on the Nassau County Council, which takes up a considerable amount of Silk’s time, and considers Damon to be a personal friend. She also knows about Damon’s volatile temper and irrational expectations. She has historically tried to resolve any animosity Damon has towards Lang.
This time, Silk is concerned that Damon will make good on her threat to take business away from Stonebridge. In a phone call to Damon, Silk says she understands Damon’s unhappiness with the poor performance and promises to discuss the situation with Lang and take appropriate action if necessary. She also promises Damon shares on a pro rata basis in an upcoming equity offering the company is handling assuming the stock is suitable for Damon’s portfolio.
Later that day, Silk reviews transactions in Damon’s portfolio and determines that Lang’s poor asset allocation reduced the portfolio’s returns by a considerable amount. She then calls Lang into her office. During that closed-door meeting, Silk criticizes Lang’s handling of the portfolio and tells him she is giving the portfolio to another analyst with more experience. Before dismissing Lang, she calls the other analyst, John Van Zant, and tells him that he will be taking over Damon’s portfolio immediately, adding the warning that if the portfolio does not perform better, Van Zant will not get his bonus this year.
The Code and Standards was most likely violated by:
A. Lang’s management of Damon’s portfolio.
B. Damon’s irrational demands.
C. Silk’s attempts to resolve any animosity for Lang.
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【单选】
Marc Feldman, CFA, is manager of corporate investor relations for a high-tech startup, zippy.com, in Boise, Idaho. Feldman learns that Larry Smith, controller, is altering the accounting records. Knowing the data is incorrect, Feldman releases Smith's financial data to investors. This action:
A. constitutes a violation of the Standard concerning duty to employer.
B. constitutes a violation of Standard III(D) concerning performance presentation.
C. constitutes a violation of his fundamental responsibilities under the Code and Standards.
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【单选】
Steve Copper has worked as an independent consultant for the past ten years advising companies on various ways to increase their internal efficiency and thereby increase the firm’s stock price as well. Copper recently accepted a job offer from an equity research firm as a senior stock analyst. One of the firms he will be responsible for researching, Johnson Machine Tools (JMT), is also one of his consulting clients. Copper currently has a contract with JMT to provide consulting services for another six months which he plans to honor even though there are no penalties in the contract for early termination on his part. According to CFA Institute Standards of Professional Conduct, which of the following is the most appropriate action for Copper to take? Copper should:
A. disclose the arrangement only if he plans to renew the contract in six months.
B. disclose the consulting arrangement to clients considering JMT as an investment.
C. terminate the contract with JMT prior to issuing any research on the company.
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【单选】
Perley & Sons is an investment advisor company that just signed a contract with full discretionary power for the management of assets for Bright Future, a charitable fund. Without consultation, portfolio manager Martin Brown, CFA, decides to trade the funds’ assets through a brokerage firm that provides, as an additional benefit, research reports for companies in the microchip industry. These companies represent the main investment interest for most of the Perley & Sons clients. The Bright Future portfolio does not hold any equities in the microchip industry, and, because of its risk profile, is unlikely to ever do so. Which of the following activities represents a possible breach with the CFA Institute standards?
A. Accepting research reports from the brokerage firm that do not benefit client portfolios.
B. Exercising a selection principle that does not comply with the idea of best trade price and execution.
C. Lack of action in consulting with the client before choosing the brokerage firm.
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