Park is very frustrated after taking her Level II exam. While she was studying for the exam, to supplement the curriculum provided, she ordered and used study material from a third-party provider. Park believes the additional material focused her attention on specific topic areas that were not tested while ignoring other areas. She posts the following statement on the provider’s discussion board: “I am very dissatisfied with your firm’s CFA Program Level II material. I found the exam extremely difficult and myself unprepared for specific questions after using your product. How could your service provide such limited instructional resources on the analysis of inventories and taxes when the exam had multiple questions about them? I will not recommend your products to other candidates.”

C. Park violated the Code and Standards by providing specific information on topics tested on the exam.

A. Park violated the Code and Standards by purchasing third-party review material.

B. Park violated the Code and Standards by providing her opinion on the difficulty of the exam.

Jefferson Piedmont, CFA, a portfolio manager for Park Investments, plans to manage the portfolios of several family members in exchange for a percentage of each portfolio’s profits. As his family members have extensive portfolios requiring substantial attention, they have requested that Piedmont provide the services outside his employment with Park. Piedmont notifies his employer in writing of his prospective outside employment. Two weeks later, Piedmont begins managing the family members’ portfolios. By managing these portfolios, which of the following CFA Institute Standards of Professional Conduct has Piedmont violated?

C. Both Additional Compensation and Conflicts of Interest

Albert Nyakenda, CFA, was driving to a client’s office where he was expected to close a multi-million-dollar deal when he was pulled over by a traffic policeman although he did not believe he had violated any traffic laws. When Nyakenda realized the policeman planned to wrongly ticket him for speeding, he offered to buy him “lunch” so that he could quickly get to his client’s office. The lunch would cost significantly more than the ticket. The alternative was to go to the police station and file a complaint of being wrongly accused that would also involve going to court the next day to present his case. Did Nyakenda most likely violate the CFA Code of Ethics?

B. No, because he was wrongly accused.

C. No, because the cost of lunch is more than the ticket.

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 spending a few minutes getting acquainted, Brown explains 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?

A. Brown should have determined Green’s needs, objectives, and tolerance for risk before making a recommendation of any type of security.

B. Brown should have thoroughly explained the characteristics of the company to Green, including the characteristics of the industry in which the company operates.

C. Brown should have explained her qualifications, including her education, training, and experience and the meaning of the CFA designation.

CFA Institute support of a local country sponsor to drive the adoption of the GIPS standards seeks to:

A. provide a link between the governing body and the local markets.

B. promote the standards as mandatory.

C. translate the standards into the local language for use as the official governing version.

To claim compliance with the GIPS standards, a firm is required to:

A. adhere to certain calculation methodologies.

B. conduct an independent third-party verification of its claim of compliance.

C. perform periodic internal compliance checks of its investment performance process.

Which of the following best identifies an internal trait that may lead to poor ethical decision making?

C. Promise of money or prestige

Jacques Lagarde, CFA, is a sell-side analyst at Springhill Financial, a small investment bank. Springhill is the lead manager for the equity offering of Chorale Music. Lagarde is not part of the IPO team for this offering. While finalizing a research report on Chorale, Lagarde discovers inconsistencies that makes him believe the company may have concealed losses in its leasing division last quarter that would significantly reduce its earnings. Lagarde suspects that Springhill’s investment banking team are aware of these unreported losses. The prospectus for Chorale’s equity offering has already been approved by regulators and distributed to potential investors. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, Lagarde should most likely:

A. report the issue to his supervisor.

B. issue a report showing the leasing division losses.

C. issue the report using data as reported in the prospectus.

How does ethical conduct most likely compare with what is legally required?

A. Ethical conduct goes beyond what is legally required.

B. There are no differences between the two; they are the same.

C. Doing what is legally required removes the need for ethical conduct.

Ileana Inkster, CFA, was recently offered a senior management position within the trust department at a regional bank. The department is new, but the bank has plans to expand it significantly over the next few months. Inkster has been told she will be expected to help grow the client base of the trust department. She is informed that the trust department plans to conduct educational seminars and pursue the attendees as new clients. Inkster notices that recent seminar advertisements prepared by the bank’s marketing department do not mention that investment products will be for sale at the seminar. The ads indicate attendees can “learn how to immediately add $100,000 to their net worth.” What should Inkster most likely do to avoid violating any CFA Institute Standards of Professional Conduct?

A. Decline to accept the new position

B. Accept the position and revise the marketing material

C. Accept the position and inform senior management of inadequate compliance procedures

Gregor Pavlov, CFA, is a fund manager working for the general partner of a new private equity fund. Pavlov includes in the fund marketing material his performance history from his previous employer. He received permission from his former employer to take his historical recommendations and the supporting research reports he used to make those recommendations. Did Pavlov most likely violate the CFA Institute Standards?

C. Yes, with regard to Record Retention

Carter works for Invest Today, a local asset management firm. A broker that provides Carter with proprietary research through client brokerage arrangements is offering a new trading service. The broker is offering low-fee, execution-only trades to complement its traditional full-service, execution-and-research trades. To entice Carter and other asset managers to send additional business its way, the broker will apply the commissions paid on the new service toward satisfying the brokerage commitment of the prior full-service arrangements. Carter has always been satisfied with the execution provided on the full-service trades, and the new low-fee trades are comparable to the fees of other brokers currently used for the accounts that prohibit soft dollar arrangements.

A. Carter can trade for his accounts that prohibit soft dollar arrangements under the new low-fee trading scheme.

B. Carter cannot use the new trading scheme because the commissions are prohibited by the soft dollar restrictions of the accounts.

C. Carter should trade only through the new low-fee scheme and should increase his trading volume to meet his required commission commitment.

Bryan Barrett, CFA, runs an investment advisory service providing advice on gold and other commodities to several large retail banks. Barrett advertises his services in widely read publications to broaden his business to include retail clients. Because the client base for the institutions that Barrett serves is large, he is comfortable stating in the ads that thousands of his clients have benefited from his advice. Does Barrett's advertisement most likely violate any CFA Institute Standards of Professional Conduct?

B. Yes, related to Misrepresentation.

C. Yes, related to Communication with Clients.

Which of the following is most likely found in the CFA Institute Standards of Professional Conduct, Standard I–Professionalism? Members and candidates must:

A. not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence.

B. place the integrity of the investment profession and the interest of clients above their own interest.

C. maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.

The Responsibilities as a CFA Institute Member or CFA Candidate Standard explicitly states a requirement regarding:

C. reference to the CFA Program.

B. responsibility of supervisors.

Sheila Schleif, CFA, is an equity analyst at an investment banking division of Mokara Financial Group, a full service financial group. Schleif uses a multi-factor computer model to make stock recommendations for all clients of Mokara. Schleif discovers that the model contains an error. If the error were corrected, her most recent buy recommendation communicated to all clients would change to a sell. Schleif corrects the error, changing the buy to a sell recommendation, and then simultaneously distributes via e-mail the revision to all investment banking clients who received the initial recommendation. A week later, Schleif sells the same shares she held in her personal portfolio. Concerning her actions, Schleif most likely violated which of the following CFA Institute Standards of Professional Conduct?

C. Diligence and Reasonable Basis

When unethical behavior erodes trust in an investment firm, that firm is more likely to experience:

C. lower revenues and higher expenses.

Colin Gifford, CFA, is finalizing a monthly newsletter to his clients, who are primarily individual investors. Many of the clients’ accounts hold the common stock of Capricorn Technologies. In the newsletter, Gifford writes, “Based upon the next six month’s earnings of $1.50 per share and a 10% increase in the dividend, the price of Capricorn’s stock will be $22 per share by the end of the year.” Regarding his stock analysis, the least appropriate action Gifford should take to avoid violating any CFA Institute Standards of Professional Conduct would be to:

C. identify limitations of the analysis.

Disclosure of confidential CFA exam information will most likely be detected by the Professional Conduct staff through:

A. monitoring online and social media.

B. analysis of Proctor Reports.

C. annual Professional Conduct Statements.

Which of the following is a correct statement of a member’s or candidate’s duty under the Code and Standards?

A. In the absence of specific applicable law or other regulatory requirements, the Code and Standards govern the member’s or candidate’s actions.

B. A member or candidate is required to comply only with applicable local laws, rules, regulations, or customs, even though the Code and Standards may impose a higher degree of responsibility or a higher duty on the member or candidate.

C. A member or candidate who trades securities in a securities market where no applicable local laws or stock exchange rules regulate the use of material nonpublic information may take investment action based on material nonpublic information.

Florence Zuelekha, CFA, is an equity portfolio manager at Grid Equity Management (GEM), a firm specializing in commodities. Zuelekha, who previously focused on alternative energy, recently attends her first commodity conference, sponsored in large part by GEM. Independent industry experts argued that commodities would increase in value and recommended that investors hold at least 10% of their portfolio assets in commodities based on consistent increases in their values over the previous two years. Without doing any additional research, Zuelekha recommends to all her clients an immediate allocation of 5% of their portfolio into commodities. Over the next few weeks, Zuelekha moves her own portfolio to a 10% commodity allocation. Which of the CFA Standards did Zuelekha most likely violate?

C. Diligence and a Reasonable Basis.

B. Independence and Objectivity.

Suni Kioshi, CFA, is an analyst at Pacific Asset Management, where she covers small capitalization companies. On her own time, Kioshi often speculates in low price thinly traded stocks for her own account. Over the last three months, Kioshi has purchased 50,000 shares of Basic Biofuels Company giving her a 5% ownership stake. A week after this purchase, Kioshi is asked to write a report on stocks in the biofuels industry with a request to complete the report within two days. Kioshi wants to rate Basic as a “buy” in this report but is uncertain how to proceed. Concerning the research report, what action should Kioshi most likely take to prevent violating any of the CFA Institute Code of Ethics and Standards of Professional Conduct?

C. Disclose her stock ownership.

The most important factor in promoting ethical decision making among an investment firm’s employees is:

A. a strong culture of integrity by the firm’s senior management.

B. adoption of a code of ethics that clearly defines the firm’s ethical principles.

C. the investment professional’s natural desire to do the right thing.

Molly Burnett, CFA, is a portfolio manager for a fund that only invests in environmentally friendly companies. A multinational utility company recently acquired one of the fund’s best performing investments, a wind power company. The wind power company’s shareholders received utility company shares as part of the merger agreement. The utility has one of the worst environmental records in the industry, but its shares have been one of the top performers over the past 12 months. Because the utility pays a high dividend every three months, Burnett holds the utility shares until the remaining two dividends are paid for the year then sells the shares. Burnett most likely violated the CFA Institute Standard of Professional Conduct concerning:

C. independence and objectivity.

Meshack Bradovic, CFA, was recently hired as a credit analyst at a credit rating agency whose major clients include publicly listed companies on the local stock exchange. One of the clients is currently preparing to issue a new bond to finance a major factory project. Analysts are speculating that without the new factory the company will not survive the onslaught of competition from increasing imports; therefore, the company is counting on an upgraded credit rating to enhance the subscription level of the issue. Bradovic’s research suggests that the creditworthiness of the company has severely deteriorated over the last year due to negative operating cash flows. Without conducting extensive research, Bradovic’s boss puts pressure on him to upgrade the credit rating to an investment grade rating. Bradovic reports this to the firm’s compliance department where he is encouraged to follow his boss’s advice. What course of action is most appropriate for Bradovic to prevent any violation of the CFA Institute Code or Standards?

A. Quit his position with the firm

B. Upgrade the rating but note his objections in writing

C. Disassociate with the credit rating report, the bond issue and the client

Paper was recently terminated as one of a team of five managers of an equity fund. The fund had two value-focused managers and terminated one of them to reduce costs. In a letter sent to prospective employers, Paper presents, with written permission of the firm, the performance history of the fund to demonstrate his past success.

B. Paper violated the Code and Standards by claiming the performance of the entire fund as his own.

A. Paper did not violate the Code and Standards.

C. Paper violated the Code and Standards by including the historical results of his prior employer.

Long has been asked to be the keynote speaker at an upcoming investment conference. The event is being hosted by one of the third-party investment managers currently used by his pension fund. The manager offers to cover all conference and travel costs for Long and make the conference registrations free for three additional members of his investment management team. To ensure that the conference obtains the best speakers, the host firm has arranged for an exclusive golf outing for the day following the conference on a local championship-caliber course. Which of the following is least likely to violate Standard I(B)?

A. Long may accept only the offer to have his conference-related expenses paid by the host firm.

B. Long may accept the offer to have his conference-related expenses paid and may attend the exclusive golf outing at the expense of the hosting firm.

C. Long may accept the entire package of incentives offered to speak at this conference.

According to the Fundamentals of Compliance—Requirements section of the GIPS standards, a firm must:

A. include in total firm assets those assigned to a sub-advisor selected by the firm.

B. alter historical composite performance after a significant change in the firm’s organization occurs.

C. represent that the calculation methodology used by the firm is “in accordance with the Global Investment Performance Standards” when presenting performance.

The Investment Analysis, Recommendations, and Actions standard states that members and candidates must:

C. distinguish between fact and opinion in the presentation of investment analysis and recommendations.

A. find an investment suitable for their client before making a recommendation.

B. make reasonable efforts to ensure that performance presentation is fair, accurate, and complete.

Ethics Test - TE2

Authored by Education Trustville

Professional Development, Other

University - Professional Development

Used 1+ times

AI Actions

Add similar questions

Adjust reading levels

Convert to real-world scenario

Translate activity

More...

Content View

Student View

40 questions

Show all answers

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Scott works for a regional brokerage firm. He estimates that Walkton Industries will increase its dividend by US$1.50 a share during the next year. He realizes that this increase is contingent on pending legislation that would, if enacted, give Walkton a substantial tax break. The US representative for Walkton’s home district has told Scott that, although she is lobbying hard for the bill and prospects for its passage are favorable, concern of the US Congress over the federal deficit could cause the tax bill to be voted down. Walkton Industries has not made any statements about a change in dividend policy. Scott writes in his research report, “We expect Walkton’s stock price to rise by at least US$8.00 a share by the end of the year because the dividend will increase by US$1.50 a share. Investors buying the stock at the current time should expect to realize a total return of at least 15% on the stock.” According to the Standards:

A. Scott violated the Standards because he used material inside information.

B. Scott violated the Standards because he failed to separate opinion from fact.

C. Scott violated the Standards by basing his research on uncertain predictions of future government action.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Francesca Ndenda, CFA, and Grace Rutabingwa work in the same department for New Age Managers with Rutabingwa reporting to Ndenda. Ndenda learns that Rutabingwa received a Notice of Enquiry from the Professional Conduct Program at CFA Institute regarding a potential cheating violation when he sat for the CFA exam in June. As Rutabingwa’s supervisor, Ndenda is afraid the behavior of Rutabingwa will be seen as a violation of the CFA Code and Standards. Does Ndenda most likely have cause for concern?

A. Yes.

B. No, because her responsibilities do not apply.

C. No, not until Rutabingwa is found guilty of cheating.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Henrietta Huerta, CFA, writes a weekly investment newsletter to market her services and obtain new asset management clients. A third party distributes the free newsletter on her behalf to those individuals on its mailing list. As a result, it is widely read by thousands of individual investors. The newsletter recommendations reflect most of Huerta’s investment actions. After completing further research on East-West Coffee Roasters, Huerta decides to change her initial buy recommendation to a sell. To avoid violating the CFA Institute Standards of Professional Conduct it would be most appropriate for Huerta to distribute the new investment recommendation to:

A. newsletter recipients first.

B. asset management clients first.

C. newsletter recipients and asset management clients simultaneously.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Alexandra Zagoreos, CFA, is the head of a government pension plan. Whenever Zagoreos hires a money management firm to work with the pension plan, she finalizes the deal over dinner at a nice restaurant. At these meals, Zagoreos also arranges for the money manager to provide her payments equal to 10% of the management fee the manager receives from the pension plan with no formal documentation of this agreement. Zagoreos keeps half of the payments for her own use and distributes the remainder as cash incentives to a handful of her most trusted staff. Zagoreos least likely violated which of the following CFA Institute Code of Ethics and Standards of Professional Conduct?

A. Referral fees.

B. Loyalty, Prudence and Care.

C. Additional Compensation Arrangements.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Marc Davidson, CFA, works as a trust specialist for Integrity Financial. On his own time, Davidson starts a part time consulting business providing advice to Trustees for a fee. Since this is only part time work, he doesn't inform Integrity of the consulting business. Davidson asks his assistant to compile a list of Integrity’s clients and their contact information. The following month, Davidson is offered a similar role at Integrity’s largest competitor, Legacy Trust Services, Inc. After he begins working at Legacy, his new manager arranges for him to meet with a number of prospective clients, many of whom are clients of Integrity. After meeting with Davidson, a number of former Integrity clients decide to transfer their business to Legacy. Did Davidson’s action violate the Code and Standards?

A. No.

B. Yes, Davidson’s part time consulting business is a violation of the Standards.

C. Yes, both Davidson’s part time consulting business and his meetings with Integrity clients are a violation of the Standards.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Which is an example of an activity that may be legal but that CFA Institute considers unethical?

A. Making legally required disclosures in marketing materials

B. Trading while in possession of material nonpublic information

C. Disclosure by an employee of his or her own company’s dishonest activity

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Teresa Staal, CFA, is an investment officer in a bank trust department. She manages money for celebrities and public figures, including an influential local politician. She receives a request from the politician’s political party headquarters to disclose his stock holdings. The request indicates that local law requires the disclosure. What steps should Staal most likely take to ensure she does not violate any CFA Institute Standards of Professional Conduct?

A. Provide the information and inform her client.

B. Send the requested documents and inform her supervisor.

C. Check with her firm’s compliance department to determine her legal responsibilities.

Access all questions and much more by creating a free account

Create resources

Host any resource

Get auto-graded reports

Continue with Google

Continue with Email

Continue with Classlink

Continue with Clever

or continue with

Microsoft

Apple

Others

Already have an account?

Similar Resources on Wayground

40 questions

PRETEST KELAS D 2022

Quiz

•

University

40 questions

VSM CA Revision I - Unit 1 to 4

Quiz

•

Professional Development

35 questions

Examination of Introduction to Information Technology

Quiz

•

University

45 questions

SAFe for teams

Quiz

•

Professional Development

35 questions

Soal Latihan UP PPG 2022 (Part 7.a)

Quiz

•

Professional Development

37 questions

LENGUAJE CINEMATOGRÁFICO

Quiz

•

Professional Development

41 questions

DERECHO CONSTITUCIONAL I

Quiz

•

University

36 questions

C04 STAFF ADMINISTRATION 2/3

Quiz

•

University

Popular Resources on Wayground

7 questions

History of Valentine's Day

Interactive video

•

4th Grade

15 questions

Fractions on a Number Line

Quiz

•

3rd Grade

20 questions

Equivalent Fractions

Quiz

•

3rd Grade

25 questions

Multiplication Facts

Quiz

•

5th Grade

$fractions$

22 questions

fractions

Quiz

•

3rd Grade

15 questions

Valentine's Day Trivia

Quiz

•

3rd Grade

20 questions

Main Idea and Details

Quiz

•

5th Grade

20 questions

Context Clues

Quiz

•

6th Grade

Discover more resources for Professional Development

44 questions

Would you rather...

Quiz

•

Professional Development