WorksheetsEthics and Professional Standards - I
Total questions: 12
Worksheet time: 18mins
Benchmarks for minimally acceptable behaviors of community members are:
a code of ethics.
laws and regulations.
standards of conduct.
Situational influences in decision making will most likely be minimized if:
strong compliance programs are in place.
longer-term
consequences are considered.
individuals believe they are truthful and honest.
When unethical behavior erodes trust in an investment firm, that firm is more
likely to experience:
lower revenues only.
higher expenses only.
lower revenues and higher expenses.
Fiduciary duty is a standard most likely to be upheld by members of a(n):
employer.
profession.
not-for-
profit
body.
Which of the following statements best describes an aspect of the Professional
Conduct Program process?
Inquiries are not initiated in response to information provided by the media.
Investigations result in Disciplinary Review Committee panels for each case.
Investigations may include requesting a written explanation from the member
or candidate.
Which of the following responses most completely represents an ethical principle
of CFA Institute as outlined in the Standards of Practice Handbook?
Individual professionalism
Responsibilities to clients and employers
Ethics involved in investment analysis and recommendations
Based on the Conflicts of Interest standard, members and candidates must:
disclose, as required by law, those conflicts interfering with their professional
duties.
disclose, as appropriate, any benefit paid to others for the recommendation
of products.
seek employer approval before prioritizing their investment transactions
over those clients.
Jamison is a junior research analyst with Howard & Howard, a brokerage and
investment banking firm. Howard & Howard’s mergers and acquisitions department
has represented the Britland Company in all of its acquisitions for the past
20 years. Two of Howard & Howard’s senior officers are directors of various
Britland subsidiaries. Jamison has been asked to write a research report on
Britland. What is the best course of action for her to follow?
Jamison may write the report but must refrain from expressing any opinions
because of the special relationships between the two companies.
Jamison should not write the report because the two Howard & Howard
officers serve as directors for subsidiaries of Britland.
Jamison may write the report if she discloses the special relationships with
the company in the report.
Smith, a research analyst with a brokerage firm, decides to change his recommendation for the common stock of Green Company, Inc., from a “buy” to
a “sell.” He mails this change in investment advice to all the firm’s clients on
Wednesday. The day after the mailing, a client calls with a buy order for 500
shares of Green Company. In this circumstance, Smith should:
Accept the order.
Advise the customer of the change in recommendation before accepting the
order.
Not accept the order because it is contrary to the firm’s recommendation.
Albert and Tye, who recently started their own investment advisory business,
have registered to take the Level III CFA examination. Albert’s business card
reads, “Judy Albert, CFA Level II.” Tye has not put anything about the CFA
designation on his business card, but promotional material that he designed
for the business describes the CFA requirements and indicates that Tye participates
in the CFA Program and has completed Levels I and II. According to the
Standards:
Albert has violated the Standards, but Tye has not.
Tye has violated the Standards, but Albert has not.
Both Albert and Tye have violated the Standards.
The mosaic theory holds that an analyst:
Violates the Code and Standards if the analyst fails to have knowledge of
and comply with applicable laws.
Can use material public information and nonmaterial nonpublic information
in the analyst’s analysis.
Should use all available and relevant information in support of an investment
recommendation.
Grey recommends the purchase of a mutual fund that invests solely in long-term US Treasury bonds. He makes the following statements to his clients:
I. “The payment of the bonds is guaranteed by the US government; therefore, the default risk of the bonds is virtually zero.”
II. “If you invest in the mutual fund, you will earn a 10% rate of return each year for the next several years based on historical performance of the market.”
Did Grey’s statements violate the CFA Institute Code and Standards?
Neither statement violated the Code and Standards.
Only statement I violated the Code and Standards.
Only statement II violated the Code and Standards.
