Chap 5 (done)

An analyst who routinely purges the files that support his research and recommendations:

• is acting in accordance to Standard III(E), Preservation of Confidentiality.

• is acting in accordance to Standard IV(A), Loyalty to Employer.

• may be violating Standard V(C), Record Retention.

Choose the best option:

• the relationship of the historical total risk to return only.

• the relationship of the historical beta and return only.

• both the historical beta and total risk and return.

Choose the best option:

• Both Standard I(B) Independence and Objectivity and Standard V(A) Diligence and Reasonable Basis.

• Standard V(A) Diligence and Reasonable Basis only.

• Standard I(B) Independence and Objectivity, only.

Choose the best option:

• Make a reasonable effort to verify that the third-party research is sound.

• Perform his own research rather than relying on third-party research.

• Disclose to clients the sources of any third-party research that supports their recommendations.

Choose the best option:

• not violate the Code and Standards in her report.

• violated the Code and Standards by not including the insider trading information in her report.

• violated the Code and Standards by not including the insider trading information and by not including the credit rating downgrade in her report.

Choose the best option:

• violated the Standard because the report did not give similar attention to all areas but instead emphasized quarterly earnings at the expense of other areas.

• did not violate the Standard.

• violated the Standard because he did not thoroughly review and analyze any information provided by Brisson.

An analyst notices that for most years a given class of assets has an abnormally high rate of return, the asset class often has an abnormally low rate of return the next year. Based upon this information, according to Standard V(A), Diligence and Reasonable Basis, the analyst can recommend:

• neither of these choices.

• an increased allocation of Treasury bills (T-bills) for all portfolios of assets that have increased dramatically in the previous year.

• short selling assets that have had a good previous year to all clients.

Lee Hurst, CFA, is an equity research analyst who has recently left a large firm to start independent practice. He is able to re-create several of his previous recommendation reports, based on his clear recollection of supporting documentation he compiled at his previous employer. He publishes the reports and obtains several new clients. Hurst is most likely:

• not in violation of any Standard.

• in violation of Standard V(C) "Record Retention."

• in violation of Standard V(A) "Diligent and Reasonable Basis."

In the process of recommending an investment, in order to comply with Standard V(A), Diligence and Reasonable Basis, a CFA Institute member must:

• have a reasonable and adequate basis for the recommendation.

• do both of these.

• support a recommendation with appropriate research and investigation.

In preparing research reports, which of the following is least likely required or recommended by the Code and Standards?

• Maintain copies of materials that were relied on in preparing the research report.

• Send all reports to the firm's legal counsel to ensure compliance with securities laws.

• Attribute paraphrases and summaries of material prepared by others.