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Telling a selected group of analysts new information does not constitute public disclosure, and therefore acting or causing others to act on this information is a violation of Standard 11(A) Material Nonpublic Information. Recommending the sale of a stock rated as a “hold” is not a violation of Standard III(B) Fair Dealing.
Under the mosaic theory an analyst can most likely use:
Material public information and non‐material, non‐public information.
Martha Graham, CFA, is a portfolio manager. She is very bullish on the stock of ABC Ltd. She adds the stock to all portfolios under her management such that the stock comprises 10% of each portfolio. Graham is most likely in violation of:
Standard III (C): Suitability.
An analyst is flown along with a group of peers to a company’s mining facilities on a chartered flight, and put up in a hotel for three days. In determining whether these arrangements violate Standard I (B): Independence and Objectivity, the analyst must consider:
Whether she can remain objective and whether her integrity might be perceived by her clients to have been compromised.
According to the Standard related to loyalty, prudence, and care, which of the following statements regarding the voting of proxies on client holdings is least accurate?
An investment management firm should vote all proxies on client holdings unless the client reserves that right.
Frank Henry, CFA, works as an investment manager at Beta Financials. One of his clients offered him a free trip to Mauritius for excellent performance, which Henry accepted. Henry’s boss recently learned about this arrangement from another employee, but did not do anything about the arrangement, as the client was very important to the firm. Which of the following is most likely?
Henry violated Standard IV (B): Additional Compensation Arrangements and his boss violated Standard IV (C): Responsibilities of Supervisors.
Mendoza’s brief presentation and information sheet most likely:
comply with both GIPS and the Standard regarding performance presentation.
Smith Rivers, CFA, manages the portfolio of Alan Chou. Alan has retired and relies on his investment portfolio exclusively to provide income every year to meet living expenses. Alan places an order with Smith to invest half his portfolio in a very risky biotech company. Which of the following should Smith least likely do?
Go ahead and make the trade
Martha Stevens, CFA, is an investment manager who uses her friend, Robert James, exclusively for her clients’ brokerage transactions. James provides better services than other brokers in return for a slightly higher price, which Stevens believes is justified. Which of the following statements is most accurate?
Stevens has not violated any standard.
Dudley Thompson is a bond salesman for a small broker/dealer in London. His firm is the lead underwriter on a new junk bond issue for Ibex Corporation, and Thompson has sent details of the offering to clients. Thompson calls only his accounts over £1,000,000 for whom he thinks the issue is suitable. Thompson also posts his firm's optimistic projections for Ibex's performance in several Internet chatrooms. According to the Standards concerning market manipulation and fair dealing, Thompson is in violation of:
neither of these Standards.
Jim Young, CFA, resides in the Republic of Spartica, but frequently does business in Glaburland, with a client who also happens to be a citizen of Spartica. Spartica laws apply, and they state that laws of the client’s home country govern. Spartica’s laws are more strict than the Code and Standards, while Glaburland’s laws are less strict than the Code and Standards. Young is most likely required to adhere to:
The laws of Spartica.
To comply with Standard III (E): Preservation of Confidentiality, members must preserve the confidentiality of information communicated to them by:
Past, current, and prospective clients.
Which of the following is most likely a violation of Standard III (B): Fair Dealing?
An analyst carries out trades for discretionary accounts before non‐discretionary accounts.
According to the recommended procedures for complying with the Standard on suitability, which of the following statements regarding an investment policy statement (IPS) is least accurate?
A client’s IPS must be updated at least quarterly to reflect any changes in their investment profile.
Once a supervisor learns that an employee under his supervision has violated the law or the CFA Institute Standards of Professional Conduct, his first step must be to:
Initiate an investigation to ascertain the extent of the wrongdoing.
Alpha Advisors Inc. is an investment management firm with a client base that ranges from individuals to large foundations. Which of the following firm policies is least appropriate if Alpha adopts the Code and Standards? Alpha:
excludes client accounts of family members of employees from participating in IPOs.