TE10 Mock test 3 ss1

Q. Specialized knowledge and skills, a commitment to serve others, and a shared code of ethics best characterize a(n):

• A. vocation.
• B. profession.
• C. occupation.

Mariam Musa, CFA, head of compliance at Dunfield Brokers, questions her colleague Omar Kassim, a CFA candidate and a research analyst, about his purchase of shares in a company for his own account immediately before he publishes a “buy” recommendation. He defends his actions by stating he has done nothing wrong because Dunfield does not have any personal trading policies in place. The CFA Institute Code of Ethics and Standards of Professional Conduct were most likely violated by:

• A. only Musa.
• B. only Kassim.
• C. both Musa and Kassim.

Charlie Mancini, CFA, is the Managing Director for Business Development at SV Financial (SVF), a large US-based mutual fund organization. Mancini has been under pressure recently to increase revenues. In order to secure business from a large hedge fund manager based in Asia, Mancini recently approved flexible terms for the fund’s client agreement. To allow for time zone differences, the agreement permits the hedge fund to trade in all of SVF’s mutual funds six hours after the close of US markets, which is prohibited by US regulators. Did Mancini violate any CFA Institute Standards of Professional Conduct?

• A. No.
• B. Yes, with regard to Fair Dealing.
• C. Yes, with regard to Fair Dealing and Material Nonpublic Information.

Q. Which of the following responses most completely represents an ethical principle of CFA Institute as outlined in the Standards of Practice Handbook?

• A. Individual professionalism
• B. Responsibilities to clients and employers
• C. Ethics involved in investment analysis and recommendations

Danielle Deschutes, CFA, is a portfolio manager who is part of a 10-person team that manages equity portfolios for institutional clients. A competing firm, South West Managers, asks Deschutes to interview for a position within its firm and to bring her performance history to the interview. Deschutes receives written permission from her current employer to bring the performance history of the stock portfolio with her. At the interview, she discloses that the performance numbers represent the work of her team and describes the role of each member. To bolster her credibility, Deschutes also provides the names of institutional clients and related assets constituting the portfolio. During her interview Deschutes most likely violated the CFA Institute Standards of Professional Conduct with regards to:

• A. the stock portfolio’s performance history.
• B. her contribution to the portfolio’s returns.
• C. providing details of the institutional clients.

Q. Which of the following statements best describes an aspect of the Professional Conduct Program process?

• A. Inquiries are not initiated in response to information provided by the media.
• B. Investigations result in Disciplinary Review Committee panels for each case.
• C. Investigations may include requesting a written explanation from the member or candidate.

Ethical conduct is most likely behavior that:

• A. simply considers both the direct benefit and indirect consequences on others.
• B. is perceived to be beneficial as per society’s ethical expectations.
• C. conforms to expectations as laid out by laws and regulations.

Victoria Christchurch, CFA, is a management consultant currently working with a financial services firm interested in curtailing its high staff turnover, particularly amongst CFA charterholders. In recent months, the company lost 5 of its 10 most senior managers, all of whom have cited systemic unethical business practices as the reason for their leaving. To curtail staff turnover by encouraging ethical behavior, it would be least appropriate for Christchurch to recommend the company to do which of the following?

• A. Implement a whistleblowing policy.
• B. Encourage staff retention with increased benefits.
• C. Create, implement, and monitor a corporate code of ethics.

Q. Which of the following statements clearly conflicts with the recommended procedures for compliance presented in the CFA Institute Standards of Practice Handbook?

• A. Firms should disclose to clients the personal investing policies and procedures established for their employees.
• B. Prior approval must be obtained for the personal investment transactions of all employees.
• C. For confidentiality reasons, personal transactions and holdings should not be reported to employers unless mandated by regulatory organizations.

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.