TE10 Mock test 2 ss1

Elliott Johnson, CFA, a portfolio manager at Childress Investment Management, a mid-size asset management firm, actively uses social media to discuss his firm’s outlook on the market and the stocks its analysts cover. He frequently posts on the firm’s Facebook page, his personal Twitter account, and the firm’s password-protected website. Which of the following would most likely result in Johnson violating CFA Institute Standard III(B): Fair Dealing?

• A. His tweet, “I’ll be recommending approval for this acquisition to the Investment Committee!”
• B. His post on the firm’s website listing companies reporting earnings over the next week, including consensus expectations versus the firm’s analysts’ expectations
• C. His post on Facebook following the quarterly reporting period to the firm’s clients giving the firm’s expectation regarding economic growth for the next 12 months

Lisa Hajak, CFA, specialized in research on real estate companies at Cornerstone Country Bank for the past twenty years. Hajak recently started her own investment research firm, Hajak Investment Advisory. One of her former clients at Cornerstone asks Hajak to update a research report she wrote on a real estate company when she was at Cornerstone. Hajak updates the report, which she had copied to her personal computer without the bank’s knowledge, and replaces references to the bank with her new firm, Hajak Investment Advisory. Hajak also incorporates the conclusions of a real estate study conducted by the Realtors Association that appeared in the Wall Street Journal. She references the Journal as her source in her report. She provides the revised report free of charge along with a cover letter for the bank’s client to become a client of her firm. Concerning the reissued research report, Hajak least likely violated the CFA Institute Standards of Professional Conduct because she:

• A. solicited the bank’s client.
• B. did not obtain consent to use the bank report.
• C. did not cite the actual source of the real estate study.

An investment fund manager has a finance degree and over 20 years of experience working for a top-ranking asset management firm. Based only on this information, could the investment fund manager most likely claim to be part of a profession?

• A. Yes, a person working in this industry requires specialized knowledge and skills.
• B. No.
• C. Yes, as part of the industry, he is providing a service to others.

If you are seeking guidance from the firm’s code of ethics or written policies, your actions most likely reflect which phase of an ethical decision-making framework?

• A. Decide
• B. Reflect
• C. Consider

Justin Blake, CFA, a retired portfolio manager, owns 20,000 shares of a small public company that he would like to sell because he is worried about the company’s prospects. He posts messages on several internet bulletin boards. The messages read, “This stock is going up once the pending patents are released, so now is the time to buy. The stock is a buy at anything below $3. I have done some close research on these guys.” According to the Standards of Practice Handbook, Blake most likely violated the Standard or Standards associated with:

• A. Integrity of Capital Markets and Conflicts of Interest.
• B. Integrity of Capital Markets, but not Conflicts of Interest.
• C. Neither Integrity of Capital Markets nor Conflicts of Interest.

On a flight to Europe, Romy Haas, CFA, strikes up a conversation with a fellow passenger, Vincent Trujillo. When Trujillo learns that Haas is in the investment profession, he asks about the CFA designation. Haas tells him the following about the CFA designation: Statement 1 Individuals who have completed the CFA Program have the right to use the CFA designation. Statement 2 The CFA designation is globally recognized, which is why I use it as part of my firm’s name. Statement 3 CFA charterholders must satisfy membership requirements to continue using the designation. In explaining the use of the CFA designation, Haas least likely violated the CFA Institute Standards of Professional Conduct concerning which of the following statements?

• A. Statement 1
• B. Statement 2
• C. Statement 3

According to the Global Investment Performance Standards (GIPS®), which of the following is not a part of the verification process? Testing whether the:

• A. firm has implemented policies and procedures compliant with all the composite maintenance requirements.
• B. verification is undertaken by the compliance department in the absence of a third party.
• C. firm’s processes and procedures are designed to calculate results in compliance with GIPS standards.

Edo Ronde, CFA, an analyst for a hedge fund, One World Investments, is attending a key industry conference for the microelectronics industry. At lunch in a restaurant adjacent to the conference venue, Ronde sits next to a table of conference attendees and is able to read their nametags. Ronde realizes the group includes the president of a publicly traded company in the microelectronics industry, Fulda Manufacturing, a company Ronde follows. Ronde overhears the president complain about a production delay problem Fulda’s factories are experiencing. The president mentions that the delay will reduce Fulda earnings more than 20% during the next year if not solved. Ronde relays this information to the portfolio manager he reports to at One World explaining that in a recent research report he recommended Fulda as a buy. The manager asks Ronde to write up a negative report on Fulda so the fund can sell the stock. According to the CFA Institute Code of Ethics and Standards of Professional Conduct Ronde should least likely:

• A. revise his research report.
• B. leave his research report as it is.
• C. request the portfolio manager not act on the information.

Q. ABC Investment Management acquires a new, very large account with two concentrated positions. The firm’s current policy is to add new accounts for the purpose of performance calculation after the first full month of management. Cupp is responsible for calculating the firm’s performance returns. Before the end of the initial month, Cupp notices that one of the significant holdings of the new accounts is acquired by another company, causing the value of the investment to double. Because of this holding, Cupp decides to account for the new portfolio as of the date of transfer, thereby allowing ABC Investment to reap the positive impact of that month’s portfolio return.

• A. Cupp did not violate the Code and Standards because the GIPS standards allow composites to be updated on the date of large external cash flows.
• B. Cupp did not violate the Code and Standards because companies are allowed to determine when to incorporate new accounts into their composite calculation.
• C. Cupp violated the Code and Standards because the inclusion of the new account produces an inaccurate calculation of the monthly results according to the firm’s stated policies.

Vishal Chandarana, an unemployed research analyst, recently registered for the CFA Level I exam. After two months of intense interviewing, he accepts a job with a stock brokerage company in a different region of the country. Chandarana posts on a social media blog how being a CFA candidate really helped him get a job. He also notes how relieved he was when his new employer didn’t ask him about being fired from his former employer. Which CFA Institute Code of Ethics or Standards of Professional Conduct did Chandarana least likely violate?

• A. Misconduct
• B. Loyalty to Employers
• C. Reference to the CFA Program