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

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

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

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?

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

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

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

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:

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:

Jan Loots, CFA, quit his job as a portfolio manager at an investment firm with whom he had a non-solicitation agreement he signed several years ago. Loots received permission to take his investment performance history with him and also took a copy of the firm’s software-trading platform. Subsequently, Loots sent out messages on social media sites announcing he was looking for clients for his new investment management firm. Access to Loots’ social media sites is restricted to friends, family, and former clients. Loots least likely violated the CFA Institute Standards of Professional Conduct concerning his:

Fundamental asset managers claim compliance with the CFA Institute Global Investment Performance Standards (GIPS®) and manage both discretionary and nondiscretionary segregated accounts. When constructing a single composite for the firm, Juma Dzuya includes all discretionary, fee-paying segregated accounts with both value and growth strategies. Does the composite constructed by Dzuya most likely meet GIPS criteria?

Norman Bosno, CFA, acts as an outside portfolio manager to a Sovereign Wealth Fund. Raphel Palmeti, a Fund official, approaches Bosno to interest him in investing in Starlite Construction Company. He tells Bosno if he approves a two million dollar investment in Starlite by the Fund, Bosno will receive a “bonus” that will make him wealthy. Palmeti also adds if Bosno decides not to invest, he will lose the Fund account. After doing a quick and simple analysis, Bosno determines the investment is too risky for the Fund. If Bosno agrees to make the investment, what Standard is least likely to be violated?

Amanda Covington, CFA, works for McJan Investment Management. McJan employees must receive prior clearance of their personal investments in accordance with McJan’s compliance procedures. To obtain prior clearance, McJan employees must provide a written request identifying the security, the quantity of the security to be purchased, and the name of the broker through which the transaction will be made. Pre-cleared transactions are approved only for that trading day. As indicated below, Covington received prior clearance. Security Quantity Broker Prior Clearance. A 100 Easy Trade Yes. B 150 Easy Trade Yes. Two days after she received prior clearance, the price of Stock B had decreased, so Covington decided to purchase 250 shares of Stock B only. In her decision to purchase 250 shares of Stock B only, did Covington violate any CFA Institute Standards of Professional Conduct?

Belen Zapata, CFA, is the owner of Kawah Investments. Kawah promises investors returns of up to 12% per year and claims to achieve this by investing in non-investment-grade bonds and other fixed-income instruments. Over the next 12 months, bond market yields reach unprecedented lows, and Zapata finds it impossible to achieve the returns she expected. No investments are ever made by Kawah, and clients are completely paid back all of their original investment. Zapata most likely violated the CFA Institute Standards of Professional Conduct because of the:

Standard III(E)–Preservation of Confidentiality of the CFA Institute Standards of Professional Conduct most likely requires members and candidates to keep information about current, former, and prospective clients confidential unless:

A general ethical decision-making framework will most likely:

Carolina Ochoa, CFA, is the chief financial officer at Pantagonia Computing. Ochoa is currently the subject of an inquiry by Pantagonia’s corporate investigations department. The inquiry is the result of an anonymous complaint accusing Ochoa of falsifying travel expenses for senior management related to a government contract. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, it is most appropriate for Ochoa to disclose the allegations:

Q. An investment banking department of a brokerage firm often receives material nonpublic information that could have considerable value if used in advising the firm’s brokerage clients. In order to conform to the Code and Standards, which one of the following is the best policy for the brokerage firm?

Sanctions imposed by CFA Institute for violations of the CFA Institute Code of Ethics or Standards of Professional Conduct least likely include:

Jiro Sato, CFA, deputy treasurer for May College, manages the Student Scholarship Trust. Sato issued a Request for Proposal (RFP) for domestic equity managers. Pamela Peters, CFA, a good friend of Sato, introduces him to representatives from Capital Investments, who submitted a proposal. Sato selected Capital as a manager based on the firm’s excellent performance record. Shortly after the selection, Peters, who had outstanding performance as an equity manager with another firm, accepted a lucrative job with Capital. Which of the CFA charterholders violated the CFA Institute Standards of Professional Conduct?

Q. One of the discretionary accounts managed by Farnsworth is the Jones Corporation employee profit-sharing plan. Jones, the company president, recently asked Farnsworth to vote the shares in the profit-sharing plan in favor of the slate of directors nominated by Jones Corporation and against the directors sponsored by a dissident stockholder group. Farnsworth does not want to lose this account because he directs all the account’s trades to a brokerage firm that provides Farnsworth with useful information about tax-free investments. Although this information is not of value in managing the Jones Corporation account, it does help in managing several other accounts. The brokerage firm providing this information also offers the lowest commissions for trades and provides best execution. Farnsworth investigates the director issue, concludes that the management-nominated slate is better for the long-run performance of the company than the dissident group’s slate, and votes accordingly. Farnsworth:

Q. Jurgen is a portfolio manager. One of her firm’s clients has told Jurgen that he will compensate her beyond the compensation provided by her firm on the basis of the capital appreciation of his portfolio each year. Jurgen should:

Joan Tasha, CFA, a supervisor at Olympia Advisors (OA), wrote and implemented compliance policies at her firm. A long-time OA employee, Derek Longtree, recently changed the asset allocation of a client, which is inconsistent with her financial needs and objectives and with OA’s policies. Until now, Longtree has never violated OA’s policies. Tasha discusses the issue with Longtree but takes no further action. Do Tasha’s actions concerning Longtree most likely violate any CFA Institute Standards of Professional Conduct?

Praful Chandarana, CFA, is starting a new business to offer investment consulting services to pension fund trustees in response to a new regulation that requires all pension fund Investment Policy Statements (IPS) to be reviewed and approved by an independent CFA charterholder. Prior to starting the new business, he meets with the pension fund regulator to clarify if the CFA charterholder undertaking the IPS review should be a licensed financial advisor by the capital markets regulator. The capital markets regulator requires and grants licenses to those giving investment advice to clients. The pension regulator states that they do not require the CFA charterholder to hold a financial advisor’s license, despite financial-related advice being given to the pension funds during any IPS review. Chandarana therefore starts his new business to undertake IPS reviews without obtaining a financial advisor’s license from the capital markets regulator. Subsequently, when clients of his former employer contact him he informs them of his new company and the services he offers. Does Chandarana most likely violate the CFA Code and Standards?

Prudence Charmaine, a CFA charterholder, was recently accused in writing of cheating on a professional accounting exam. She denied cheating and successfully defended herself against the allegation. As part of her defense and as evidence of her character, Charmaine stated that she is a CFA charterholder and upholds the CFA Institute Code of Ethics and Standards of Professional Conduct. On her next annual Professional Conduct Statement, Charmaine does not report this allegation to CFA Institute. Did Charmaine most likely violate the CFA Institute Code of Ethics or Standards of Professional Conduct?

Manuel Tacqueria, CFA, is a sole proprietor investment adviser managing accounts for a diversified group of clients. Tacqueria obtains his investment research through a subscription service with Alpha Services, a large financial services organization. Tacqueria notes that the research reports are sound because they are extremely detailed and comprehensive. As a result, Tacqueria feels comfortable relying solely upon this research when making recommendations to clients. Tacqueria should most likely do which of the following in order to conform to the CFA Institute Code of Ethics and Standards of Professional Conduct?

Q. Valuing assets at the amount of cash or equivalents paid or the fair value of the consideration given to acquire them at the time of acquisition most closely describes which measurement of financial statement elements?

None

Which of the following best describes a component of the income statement?

Under US GAAP, which of the following is least likely a disclosure concerning inventory?

Q. What does the P/E ratio measure?

Which of the following best describes a responsibility of the SEC?

Q. The term that describes when inflation declines but nonetheless remains at a positive level is:

Q. A client requires £100,000 one year from now. If the stated annual rate is 2.50% compounded weekly, the deposit needed today is closest to:

Q. After six months, the growth portfolio that Rayan Khan manages has outperformed its benchmark. Khan states that his odds of beating the benchmark for the year are 3 to 1. If these odds are correct, what is the probability that Khan’s portfolio will beat the benchmark for the year?

Using a common-size income statement to compare a company to its peers, an analyst can determine the company’s:

Q. Cash flows from taxes on income must be separately disclosed under:

Q. A correlation of 0.34 between two variables, X and Y, is best described as:

Q. An executive from Switzerland checked into a hotel room in Spain and was told by the hotel manager that 1 EUR will buy 1.2983 CHF. From the executive’s perspective, an indirect exchange rate quote would be:

An increase in assets and a decrease in liabilities that occur simultaneously and in equivalent magnitude are consistent with which of the following changes in equity?

The non-controlling or minority interests found in the equity section of the balance sheet are best described as the equity interests:

Q. Which role is a central bank least likely to assume?

A two-tailed test of the null hypothesis that the mean of a distribution is equal to 4.00 has a p-value of 0.0567. Using a 5% level of significance (i.e., α = 0.05), the best conclusion is to:

None

Q. A sample mean is computed from a population with a variance of 2.45. The sample size is 40. The standard error of the sample mean is closest to:

Q. During 2009, Accent Toys Plc., which began business in October of that year, purchased 10,000 units of a toy at a cost of ₤10 per unit in October. The toy sold well in October. In anticipation of heavy December sales, Accent purchased 5,000 additional units in November at a cost of ₤11 per unit. During 2009, Accent sold 12,000 units at a price of ₤15 per unit. Under the first in, first out (FIFO) method, what is Accent’s cost of goods sold for 2009?

Q. Oligopolistic pricing strategy most likely results in a demand curve that is:

None

Q. At a 5% interest rate per year compounded annually, the present value (PV) of a 10-year ordinary annuity with annual payments of $2,000 is $15,443.47. The PV of a 10-year annuity due with the same interest rate and payments is closest to:

Q. Which of the following is a required financial statement disclosure for long-lived intangible assets under US GAAP?

Q. A company chooses to change an accounting policy. This change requires that, if practical, the company restate its financial statements for:

Q. Equality between aggregate expenditure and aggregate output implies that the government’s fiscal deficit must equal:

Q. Which one of the following statements is true about non-probability sampling?

Q. One concern when screening for stocks with low price-to-earnings ratios is that companies with low P/Es may be financially weak. What criterion might an analyst include to avoid inadvertently selecting weak companies?

None

None

Q. A forward premium indicates:

None

Stagflation is best described as an economic situation involving high inflation and high:

Q. If the probability that a portfolio outperforms its benchmark in any quarter is 0.75, the probability that the portfolio outperforms its benchmark in three or fewer quarters over the course of a year is closest to:

Q. In which of the following situations would a nonparametric test of a hypothesis most likely be used?

Q. In the Ricardian trade model, a country captures more of the gains from trade if:

None

Q. A pooled estimator is used when testing a hypothesis concerning the:

Q. In an industry comprised of three companies, which are small-scale manufacturers of an easily replicable product unprotected by brand recognition or patents, the most representative model of company behavior is:

Q. What type of audit opinion is preferred when analyzing financial statements?

An expansionary fiscal policy is most likely associated with:

None

Q. The inventory–sales ratio is most likely to be rising:

None

Q. The carrying value of inventories reflects:

During a period of declining prices, a company using the last-in, first-out (LIFO) inventory method instead of first-in, first-out (FIFO) method will most likely report a lower value for:

Q. The financial statement that presents a shareholder’s residual claim on assets is the:

Q. The marketing director for a Swiss specialty equipment manufacturer estimates the firm can sell 200 units and earn total revenue of CHF500,000. However, if 250 units are sold, revenue will total CHF600,000. The marginal revenue per unit associated with marketing 250 units instead of 200 units is closest to:

Q. Which of the following is most likely to increase after an increase in aggregate real personal income?

Working capital equals the excess of:

None

None

Q. Galambos Corporation had an average receivables collection period of 19 days in 2003. Galambos has stated that it wants to decrease its collection period in 2004 to match the industry average of 15 days. Credit sales in 2003 were $300 million, and analysts expect credit sales to increase to $400 million in 2004. To achieve the company’s goal of decreasing the collection period, the change in the average accounts receivable balance from 2003 to 2004 that must occur is closest to:

None

Q. Over time, the market share of the dominant company in an oligopolistic market will most likely:

None

None

Q. If inventory unit costs are increasing from period-to-period, a LIFO liquidation is most likely to result in an increase in:

Q. For a lessor, the leased asset appears on the balance sheet and continues to be depreciated when the lease is classified as:

None

Q. A company issues $30,000,000 face value of five-year bonds dated 1 January 2015 when the market interest rate on bonds of comparable risk and terms is 5%. The bonds pay 4% interest annually on 31 December. Based on the effective interest rate method, the carrying amount of the bonds on 31 December 2015 is closest to:

None

Q. The JPY/AUD spot exchange rate is 82.42, the JPY interest rate is 0.15%, and the AUD interest rate is 4.95%. If the interest rates are quoted on the basis of a 360-day year, the 90-day forward points in JPY/AUD would be closest to: