Mock Test 1 ss1 TE10

Sue Kim, CFA, a US citizen, works as an analyst for a subsidiary of a US investment firm on a small island that attracts offshore investment accounts. Local securities laws allow insider trading. While having dinner with the CEO of a local company, Kim learns that the firm is in negotiations to be acquired for a significant premium. Would Kim most likely comply with the CFA Institute Standards if she purchased the company’s shares for her client accounts?

• A. No.
• B. Yes, local laws allow insider trading.
• C. Yes, if she receives permission from compliance department.

Which of the following is not part of the nine major sections of the GIPS® standards?

• A. Performance Fees
• B. Input Data
• C. Disclosure

When making performance presentations to prospective clients, a GIPS®-compliant firm should least likely do which of the following?

• A. Selectively report its top account performance
• B. Include the account performance of former clients
• C. Report performance history for all market cycles under review

Q. Which statement about a manager’s use of client brokerage commissions violates the Code and Standards?

• A. A client may direct a manager to use that client’s brokerage commissions to purchase goods and services for that client.
• B. Client brokerage commissions should be used to benefit the client and should be commensurate with the value of the brokerage and research services received.
• C. Client brokerage commissions may be directed to pay for the investment manager’s operating expenses.

Jackson Barnes, CFA, works for an insurance company providing financial planning services to clients for a fee. Barnes has developed a network of specialists, including accountants, lawyers, and brokers, who contribute their expertise to the financial planning process. Each of the specialists is an independent contractor. Each contractor bills Barnes separately for the work he or she performs, providing a discount based upon the number of clients Barnes has referred. What steps should Barnes take to be consistent with the CFA Institute Standards of Professional Conduct?

• A. Have his independent contractors approved by the insurance company
• B. List the consideration he receives from the specialists on monthly client invoices
• C. Inform potential clients about his arrangement with the contractors before they agree to hire him

Q. Which of the following statements best describes an aspect of the Standards of Professional Conduct? Members and candidates are required to:

• A. ensure any portfolio mandate followed is fair, accurate, and complete.
• B. promptly disclose changes that might materially affect investment processes.
• C. have a reasonable and adequate basis for decisions about client confidentiality.

Which of the following least likely reflects the two primary principles of the CFA Institute Rules of Procedure for Proceedings Related to Professional Conduct?

• A. Confidentiality of proceedings
• B. Public disclosure of disciplinary sanctions
• C. Fair process to the member and candidate

The belief that one’s ethical standards are above average is most likely a reflection of which of the following behavioral biases?

• A. Overconfidence
• B. Short-term focus
• C. Situational influence

Q. Stewart has been hired by Goodner Industries, Inc., to manage its pension fund. Stewart’s duty of loyalty, prudence, and care is owed to:

• A. The management of Goodner.
• B. The participants and beneficiaries of Goodner’s pension plan.
• C. The shareholders of Goodner.

Who most likely determines whether a violation of the CFA Institute Code and Standards or testing policies has occurred and what sanction should be imposed? The:

• A. Professional Conduct Staff and the Disciplinary Review Committee
• B. Professional Conduct Staff
• C. Disciplinary Review Committee