A research analyst uses various sources to create her final report and ratings.

To avoid a conflict with the standard on Record Retention, the firms policies should require her to:

Maintain copies of directly gathered information only. Simply comply with the local regulatory requirements on record retention Maintain a copy of all sources used, included directly collected information and third -party industry research

Question 2 of 67 All of the following statements about a CFA Institute members record keeping responsibilities are true EXCEPT:

Records can be maintained either in hard copy or electronic form and should be kept for at least seven years Records created by an employee as part of her professional activities are generally the property of the employer. Only records relating to investment recommendations and actions must be kept.

Question 3 of 67 As part of his responsibilities as a research analyst, Gonzalez, along with several other analysts, takes a tour of the corporate headquarters and meets with company management of a large electronics company in Asia. The company pays for the travel and accommodations of all the analysts participating in the 2-day tour and hosts a dinner, a golf tournament, and a sightseeing excursion for them as part of the trip. Under these circumstances, Gonzalez:

May accept the reimbursement for the travel and accommodations because the firm paid for all the analysts and did not show favoritism to Gonzalez. May attend the dinner and participate in the golf-tournament and sight-seeing excursion because Gonzalez considers these modest perks acceptable in the normal course of business. Should not accept reimbursement for his travel and accommodation expenses and should not a participate in the golf tournament and sight-seeing excursion as doing so may impinge on Gonzalezs independence and objectivity.

Question 4 of 67 Ball is leading the search committee to select a new large capitalization manager for a local university endowment. Subsequent to the request for proposal closing date, one of the potential manager, Sonic Investments, invites Ball to attend a leadership briefing conference to learn more about their services. The conference is held at a resort in Bermuda and registration includes a round of golf each day. Sonic offers to arrange for all transportation for Ball to attend. Ball accepts the offer as this will provide him with a thorough understanding of Sonic as the search committee makes their final decision. He does pay for his own airfare as there are plenty of commercial options available. Ball briefed the committee of the information he gained attending the conference at their next meeting. Following interviews with the five finalists, the committee decided that Sonic should provide superior service and recommends them to the endowment. Are Ball's actions in compliance with the best practices outlined for the Standard on independence and objectivity?

Yes, as he paid for the commercially available airfare. Yes, as the information he received benefited the selection process. No, as he did not pay all conference and travel expenses (e.g. the conference registration or hotel accommodations).

Question 5 of 67 Chang is an investment advisor who operates as a sole proprietor and has five clients. If Chang obtains employment with a brokerage firm, he:

Does not have to advise his old clients in writing of his employment with the brokerage firm or get written consent from his new employer to keep his old clients. Must get written consent from his new employer to keep his old clients but does not have to advise his old clients in writing of his employment with the brokerage firm. Must get written consent from his new employer to keep his old clients and must advise his old clients in writing of his employment with the brokerage firm.

Question 6 of 67 Chase is an analyst with a large insurance company. His personal portfolio includes a significant investment in Python, Inc., common stock. The director of the research department asked Chase to analyze Python, Inc. According to the CFA Institute Code and Standards, Chase's best course of action is to:

Place all of his investments, including Python stock, in a blind trust.

Sell his shares of Python before completing the report. Disclose the ownership of the stock to his employer and in the report.

Question 7 of 67 Choi is a part of a research team that is collectively responsible for producing investment analysis for his firms portfolio managers. The research reports of the group contain all the names of the analysts on the research team. Generally, Choi agrees with the conclusions and recommendations contained in the reports published by the group, but occasionally he holds a minority view. In the report on a particular automotive company, Choi believes prospects for the company are dim while the remainder of the research group is optimistic about the companys future. The final report recommends that investors buy stock in the company. Choi should:

Insist that his name be removed from the report. Cooperate with publishing the report but document his difference of opinion with the research team. Inform his supervisors that, unless he dissociates from the report, he will be in violation of the Code and Standards.

Question 8 of 67 Chuen recently began his professional career as an investment advisor. Prior to joining his firm, Chuen went back to school and earned an MBA and has passed all three levels of the CFA exam. Initially he discusses all recommendations being made to his clients with his supervisor to ensure they are suitable with the clients investment policy statements. Chuen recommends one particular international growth fund to several clients that focused on several of the larger emerging market countries. The fund has fees comparable to its peers, a stable portfolio management team and consistently ranked in the top percentile for quarterly and annual returns. Within the first year of having clients invest in this fund, one of the countries experienced a major economic collapse brought on by a change in governmental leaders, which caused the fund to fall by 55%.

Cheun's recommendation violated the Standard on diligence as he did not anticipate the economic collapse of a new government. Chuens recommendation complied with the Standard on diligence as the change in leaders was not known at the time of the recommendation. Chuens recommendation violated the Standard on diligence as it included an investment with potential downside risk.

Question 9 of 67 Cowell, a research analyst, has decided to change his recommendation on the common stock of Henley, Inc., from "buy" to "sell." Cowell faxed this change in investment advice to all his customers at noon. Two hours later, one of his clients called with a buy order for 500 shares of Henley, Inc. Under these circumstances, Cowell:

Should accept the order because it is a transaction specifically requested by his client. Should advise the customer of the change in recommendation before accepting the order. Should not accept the order until one day has elapsed after the communication of the change in recommendation.

Question 10 of 67 Danaher heads the research department of a large brokerage firm. The firm has many analysts, some of whom are subject to the CFA Institute Code and Standards. Which statement best describes Danaher's ability to delegate her supervisory responsibilities under the CFA Institute Code and Standards?

Danaher cannot delegate supervisory responsibility to those subordinates who are not subject to the CFA Institute Code and Standards. Danaher would no longer have responsibility for those duties delegated to her subordinates. Danaher would retain supervisory responsibility for all subordinates despite her delegation of some duties.

Question 11 of 67 Dudley has been hired by Carson Industries to manage its pension fund. Dudley's fiduciary duty is owed to:

The management of Carson. The shareholders of Carson. The participants and beneficiaries of Carson's pension plan.

Question 12 of 67 Esposito resides in Country A, a country that has no securities laws governing the disclosure of conflicts of interest to clients. However, Esposito does business in Country B, a country whose securities laws regarding conflicts of interest are more strict than the CFA Institute Code and Standards. The laws of Country B are applicable to Esposito's conduct. Esposito must:

Comply with the laws of Country A, because that is where he resides. Comply with the laws of Country B, because those laws are more strict than the Code and Standards. Comply with the Code and Standards, because CFA Institute members must comply with the Code and Standards at all times.

Question 13 of 67 Gaines, a financial analyst for Skinner Investment Counseling, is told by the investor relations representative for Firebird Avionics, a major aircraft manufacturer that the firm is in the final stages of building a new fuel efficient jet engine. This information is divulged by Firebird at the most recent quarterly conference call. In a research report, Gaines uses this information along with other information he obtained from the company distributed to the public in a research report that includes a "buy" recommendation for Firebird stock. Which of the following statements is/are true:

Gaines violated CFA Institute Standards of Professional Conduct because he used material inside information. Gaines' actions did not violate CFA Institute Standards of Professional Conduct. Gaines violated CFA Institute Standards of Professional Conduct because he failed to separate opinion from fact.

Question 14 of 67 Giannini is the head of the research department for an investment management firm. While Giannini is an accomplished analyst, in his current position, he does very little original research on his own. He reviews and revises the reports written by a very capable staff of junior analysts who produce original and insightful work. The firm has a policy that every report distributed to clients includes Gianninis name and contact information as the head of the department. This policy:

Violates the Code and Standards. Complies with the Code and Standards so long as the report also identifies the analyst who actually did the research and wrote the report. Misrepresents Gianninis abilities as a research analyst and the extent of his expertise.

Question 15 of 67 Greene is a well respected healthcare analyst with Sell-side Capital Research. Clients of Sell-side find the weekly newsletter very valuable due to the model information provided. After a dispute over compensation, Greene decides to leave the firm. Hernandez, a senior member of Greenes team, decides to remain with Sell-side and becomes the primary analyst for the covered portfolio. Given his familiarity with the current recommendations and processes, Hernandez continues to produce the newsletter as scheduled with the same level of content. Hernandez has

Violated Standard on misrepresentation, unless he acknowledges that Greene was the original designer of Sell-sides weekly investment newsletter Violated Standard on misrepresentation, unless he acknowledges that Greene was the original designer of model information included in Sell-sides weekly investment newsletter Not violated Standard on misrepresentation, as the model and newsletter were developed for Sell-side and the firm retains ownership subsequent to Greenes departure

Question 16 of 67 Gutierrez sells insurance-based securities to investors seeking long-term stable income investments. Gutierrez enters into agreements with several local financial planners to refer clients to him as part of their investment advice. Gutierrez:

Has violated the Code and Standards by entering into a referral arrangement of this type. Has violated the Code and Standards if he does not inform investors of these referral arrangements. Has not violated the Code and Standards as the financial planners, not Gutierrez, are required to disclose the referral arrangements.

Question 17 of 67

Hamilton manages the portfolios of wealthy individuals. Several of her clients have investments in asset-backed securities to increase the yield on their portfolio. Hamilton is reviewing possible scenarios that potentially would have a negative impact on a credit rating agency's independence and objectivity related to their rating of the ABS issues. Which scenario might prompt Hamilton to bypass a specific issue due to its rating?

The only rating agency following a specific security also advised in structuring the product, which was not disclosed by the firm. The sponsoring firm paid all major rating agencies a flat fee to rate their new issue. One rating agency included scenarios that went beyond the historical norms for expected defaults of the assets to determine the risks of the security and its rating.

Question 18 of 67 Help for All Endowment is looking to replace their current fixed-income external adviser. They contact an outside consultant to assist in the process. After narrowing the list of possible firms to 20 with the consultant, a Request of Proposal is submitted based on CFA Institute models. Five firms are brought in for interviews to better understand their investment strategies and the performance over the last 5 years. The names and rational behind the decision on each of the five finalists was provided to the Board of Trustees for their approval of the firm deemed most qualified. The Trustee Chairman feels the endowment should go with one of the firms in which he has a long-term professional and personal relationship with the CEO. The search committee had ranked that firm as the lowest of the finalists due to their higher fees, and minimal code of ethics. The Board agrees with the Chairman and approves hiring of his friend's firm believing that all of the five finalists firms were qualified to manage this portion of the endowments portfolio. The Chairman has

Violated the Code and Standards by allowing the Endowment to hire a consultant to assist in finding a new external adviser. Violated the Code and Standards by allowing the Endowment to use the CFA Institute RFP models to solicit additional information on potential firms. Violated the Code and Standards by basing his hiring recommendation on his relationship with the firm's management.

Question 19 of 67 If a CFA Institute member believes that the activity of his or her co-workers is unethical or in violation of the Code and Standards, the member is should: I. Confront the person engaging in the unethical conduct.

II. Attempt to stop the behavior by bringing it to the attention of their employer. III. Dissociate from behavior by resigning, if necessary.

I, II and III I and II II and III

Question 20 of 67 Johansen is the portfolio manager for a large-cap equity investment fund. His colleagues at another investment firm make him aware of a small-cap company whose prospects for future growth and earnings are outstanding. He invests in the company on behalf of the fund and, in the course of the next two years, the performance of the companys stock contributes greatly to his investment fund beating its benchmark. Johansen:

Has violated the Code and Standards because his investment in the small-cap company is contrary to the stated objectives of the fund. Has violated the Code and Standards since he became aware of the investment from his colleagues at another firm and therefore used confidential information. Has not violated the Code and Standards because the investment was an equity investment which is the type contemplated by the investment fund he manages.

Question 21 of 67 Lautenschlager has completed her due diligence on a petrochemical company and is preparing to issue a somewhat negative report on the company that will include a sell recommendation. She gives a final draft of the report to company management to review for factual accuracy. The CEO of the company is highly upset by the report and threatens to cut-off her access to company officials and bar Lautenschlager from conference calls and other avenues of communication with the company if the report is published. Lautenschlagers BEST course of action is to:

Publish the report as written, regardless of the objections by company management. Revise her analysis of the company in light of managements objections to the report. Publish the report with the analysis intact, but remove the sell recommendation.

Question 22 of 67 McFiggen, an analyst, has written a report for Braveheart Investment Research, recommending investors purchase the securities of a new printing services company. McFiggen owns a significant portion of the companys stock and Braveheart is a large customer of the company. At the bottom of the research report, in a footnote, McFiggen makes the following disclosure, The author of this report may or may not have a financial stake in the company and Braveheart Investment Research may have outside business relationship with the company that is the subject of this report. Which of the following statements is CORRECT:

The disclosure is adequate because it alerts readers to the conflicts of interests of McFiggen and his employer with respect to the printing company. The disclosure is inadequate as it is not made in a prominent manner and with sufficient specificity to effectively communicate the conflict of interest to clients and prospective clients. The disclosure related to Bravehearts conflict of interest is adequate but the disclosure related to McFiggens conflict of interest is inadequate.

Question 23 of 67 Members must keep information about current, former, and prospective clients confidential unless: I. The information concerns illegal activities on the part of the client. II. Disclosure of the information is required by law. III. The client or prospective client permits disclosure.

I, II and III I and II II and III

Question 24 of 67 One of the discretionary accounts managed by Farnsworth is the Jones & Sons employees' profit-sharing plan. Jim Jones, the company president, recently asked Farnsworth to vote the shares in the firm's profit-sharing plan in favor of the company-nominated slate of directors and against the directors sponsored by a dissident stockholder group. Farnsworth

investigates the proxy-fight issue, concludes that management's slate of directors is better for the long-run performance of the firm than those recommended by the dissident group, and votes accordingly. Farnsworth:

Violated the Standards in voting the shares in the manner requested by Jones. Did not violate the Standards in voting for the current management because Farnsworth determined that it was in the best interests of the firm after investigating the issue. Did not violate the Standards in following whatever was requested by Jones because the voting of proxies is not an important responsibility of a profit-sharing plan investment manager.

Question 25 of 67 Phoung has a number of investment management clients. He gives discount from his standard investment management fee rate to clients who have US$25 million or more in their accounts. He also provides personalized service to these clients, regularly checking in with them by phone to discuss new investment opportunities. Phoung:

Has not violated the Code and Standards as long as his increased level of service to some clients has not disadvantaged other clients and he has disclosed his different levels of service to all his clients. Has violated the Code and Standards by not treating all his clients fairly with respect to his investment management fees. Has not violated the Code and Standards since the level of investment management fees charged to clients are not addressed by the Code and Standards.

Question 26 of 67 Powell is a research analyst with Rossington & Collin a brokerage and investment banking firm. R&C's mergers and acquisitions department has represented Wilkenson Company in all its investment banking deals. Two of R&C's senior officers are directors of several Wilkenson subsidiaries. Powell has been asked to write a research report on Wilkenson. What is Powell's best course of action?

Powell may write a factual report but must refrain from expressing any opinions because of the special relationship between the two companies. Powell should not write the report because the officers are "constructive insiders." Powell may write the report if she discloses in the report the officer's special relationships with the company and the fact that Rossington & Collin has served as Wilkinsons investment banker.

Question 27 of 67 Reese is portfolio manager for several clients. She uses the research of the highly skilled analysts in her firm to support her investment decisions. Reese:

Complied with the Code and Standards. Violated the Code and Standards because she did not exercise diligence in making her investment decisions. Violated the Code and Standards because she was unfamiliar with the processes and procedures used by the analysts in coming to their conclusions.

Question 28 of 67 Saunders, a mining analyst for Hokassen Investments, has completed his analysis of Okun Drilling & Mining for a wealthy client of Hokassen. He has concluded that, based on core samples and geological surveys of land owned or leased by Okun, the company has in excess of 1 million ounces of gold available to mine. Saunders drafts a research report stating the following: "Based on the fact that the company has 1 million ounces of gold to be mined, I recommend purchasing Okun stock for your portfolio." If Saunders presents his report to the wealthy client, he will have:

Violated the CFA Institute Standards of Professional Conduct because he did not distinguish between fact and opinion. Violated the CFA Institute Standards of Professional Conduct because he did not indicate the basic characteristics of the investment. Complied with the CFA Institute Standards of Professional Conduct.

Question 29 of 67 Sheramy, a portfolio manager for Woodbridge Investments handles the account of Zamborino, a client of the firm. Zamborino wants to pay Sheramy a $100,000 bonus over and above her compensation from Woodbridge Investments if Sheramy achieves an 18 percent annual return on Zamborino's account. To comply with the Code and Standards, Sheramy:

Cannot accept this offer because it will interfere with her independence and ability to be objective regarding investment decisions and recommendations.

Can accept this offer as long as she discloses the arrangement to her employer. Can accept this offer and disclose the bonus to her employer only if she actually receives it.

Question 30 of 67 Smith has a client that wants to increase his holdings of fixed income securities as the risks of owning equity investments were becoming too much for him. The client is open to all securities with very high investment grade credit ratings and rates better than government secured notes. Smith recently read an article discussing the profitability and success of asset-backed securities, which led him to believe these securities would meet the clients request. He searched the firms list of available securities and recommended a particular issue that was rated AAA with a rate 250 basis points above the comparable government note. Several months after purchasing, the security missed a scheduled interest payment as the assets underlying the investment experienced a larger than expected level of defaults. This was followed by downgrades to credit ratings and ultimately a decline in the value of the investments.

Smith violated the Standard on reasonable basis in relying solely on the securities investment rating as the basis for recommending the security Smith did not violate he Standard on reasonable basis as his reading of the asset-based security article provided an adequate understanding of the risks of the security Smith did not violate he Standard on reasonable basis as investment advisors do not have to review the securities placed on the firms approved lists

Question 31 of 67 Stone, a financial analyst, follows the Amity Paving Company for his employer. Which one of the following scenarios is Stone most likely to have to disclose to his employer:

The fact that Stone's son worked at Amity as a laborer during the summer while in school. Stone's participation on Amity's board of directors. Stone hired Amity to pave his home's driveway.

Question 32 of 67 The "mosaic theory" holds that a member:

Violates the CFA Institute Code of Ethics and Standards of Professional Conduct if the member fails to have knowledge of and comply with all applicable laws. Can use material public information or nonmaterial nonpublic information in the member's analysis otherwise obtained only through insider information. Should include all available and relevant information in a research report in support of an investment recommendation.

Question 33 of 67 The CFA Institute Standards of Professional Conduct state that members may use information from other sources without acknowledgment if the information:

Is being reported only to the member's employer or associates. Is factual information published in recognized financial and statistical reporting services. Was originally communicated verbally.

Question 34 of 67 The corporate finance department of an investment banking firm has decided to compete for the business of Moosehead Corporation. Knowing that the firm's brokerage unit now has a "sell" recommendation on Moosehead, the head of investment banking asks the head of the brokerage unit to change the recommendation from "sell" to "buy." According to the CFA Institute Standards of Professional Conduct, the brokerage unit would be permitted to:

Increase the rating by no more than one increment (in this case to a "hold" recommendation). Remove the company from the research universe and put it on a restricted list giving only factual information about the firm. Assign a new analyst to the company and change the rating.

Question 35 of 67 To undertake independent practice for an outside entity apart from fulfilling their duties to their regular employer, members must secure written permission from:

Their employer only.

The outside entity only. Both their employer and the outside entity.

Question 36 of 67 Tom is part of a team researching Ultimate Mining Co. In completing the report, Tom comes to a different conclusion from the team as to the recommendation of the firm. The team determines both outcomes are reasonable based on the information available and decides to stay with the recommendation that differs from Tom. Which of the following should Tom do to avoid violating the codes and standards?

He should issue a secondary report or appendix stating these alternative findings. He can allow his name to appear as part of the team on the report, as there is a reasonable basis for the recommendation. He should not allow his name to appear as part of the team as that would be a misrepresentation of his findings.

Question 37 of 67 Vidovich received a year-end gift of a set of new golf clubs from a client who was delighted by the performance of her portfolio, managed by Vidovich. Vidovich may do all of the following EXCEPT:

Accept the gift, keeping the matter confidential. Decline the gift. Accept the gift and disclose its receipt to his employer.

Question 38 of 67 Vincent, a trustee for the pension plan of Ivy Industries, has just received a commission schedule from Beckett Brothers Brokerage, a firm he is not currently using for trades. The fee schedule is lower than that charged by Atkins Brokerage, the firm Vincent currently uses for most transactions. Atkins also provides research data and performance measurement for the pension plan, services which Beckett is not equipped to handle. Vincent is concerned that he may be violating his fiduciary duty by not using the lowest cost brokerage firm. Which one of the following statements is true?

Vincent will violate his fiduciary duty unless he begins trading through Beckett. Vincent will not violate his fiduciary duty unless he personally profits from his relationship with Atkins. Vincent can continue to trade through Atkins if he determines that the value of the services offered by the brokerage firm is commensurate with the cost.

Question 39 of 67 Ward is scheduled to visit the corporate headquarters of Evans Industries. Ward expects to use the information obtained to complete his research report on Evans stock. Ward learns that Evans plans to pay all of Ward's expenses, including costs of meals, hotel room, and air transportation. Which of the following actions by Ward would be the best course of action under the CFA Institute Code and Standards?

Write the report without taking the trip. Pay for all travel expenses, including costs of meals and incidental items. Accept the expense-paid trip but disclose the value of the services accepted in the report.

Question 40 of 67 Waters is an investment analyst who has accumulated and analyzed several pieces of nonpublic information through her contacts with drug firms. Although none of the information is "material," Waters correctly concluded that the earnings of one of the drug firms would be unexpectedly high in the coming year. According to the CFA Institute Standards of Professional Conduct, Waters:

Can use the information to make investment recommendations and decisions. May use the information, but only after approval from a compliance officer or supervisory analyst. Should urge the drug firm to make public dissemination of the information immediately.

Question 41 of 67

When a corporate issuer, seeking to increase their visibility with potential investors, hires an analyst to write research on their company, the analyst would violate the Code and Standard should they:

Engage in thorough, independent and unbiased analysis of the company. Disclose in the report that the analyst is being paid by the company to write the report. Allow the company that paid for the report to review the analysis and recommendations.

Question 42 of 67 When changing employers or starting another company, which of the following statements regarding the responsibilities of CFA Institute members is/are true: I. Departing employees are free to make arrangements or preparations to go into competitive business before terminating their relationship with their employer. II. Departing employees have a duty to act in their employer's best interests until their resignations become effective. III. Departing employees may solicit their employer's clients for the new venture prior to cessation of employment.

I and III. II only. I and II.

Question 43 of 67 Which action would most likely violate the standard on suitability for an investment professional managing individual portfolios?

Obtaining information on that part of the clients portfolio managed by the investment professional and not on any assets invested elsewhere, as those are out of the control of the investment manager. Drafting a written investment performance statement (IPS) that addresses the clients risk tolerance, return requirements, and investment constraints. Updating the clients financial circumstances and IPS on a regular basis.

Question 44 of 67 Which of the following actions is MOST LIKELY to comply with the Code and Standards:

Posting information about questions from the prior year's exam on a public discussion forum. Providing your exam prep course provider a list of topics not tested from the body of knowledge. Posting derogatory comments regarding the CFA Program on a website for CFA candidates.

Question 45 of 67 Which of the following are forms of plagiarism? I. Citing quotations said to be attributable to "leading analysts" or "investment experts" without specific reference. II. Presenting statistical forecasts by others with the sources identified but without the qualifying statements that may have been used by the originator. III. Using factual information published by a recognized financial statistics reporting service without acknowledgment.

I and II only. II only. II and III only.

Question 46 of 67 Which of the following does not violate the standard on misrepresentation:

Plagiarizing the work of another analyst in writing a research report. Omitting relevant facts from a research report. Guaranteeing a specific rate of return on the equity securities of a public company.

Question 47 of 67 Which of the following is a violation by a Member in meeting their obligations with regard to presenting investment performance under the Code and Standards:

Presenting the performance of the weighted composite of similar portfolios. Making disclosures that explain the performance results being reported. Presenting the performance of a new investment strategy by applying the strategy to historical performance data.

Question 48 of 67 Which of the following is acceptable under the standard on market manipulation:

Transactions that give the impression of artificial activity or price movement in the price of a security. Exploiting a dominant position to affect the price of an asset or its underlying derivative. Employing trading strategies that exploit market inefficiencies.

Question 49 of 67 Which of the following is MOST LIKELY to be considered a material piece of information regarding a company?

A competitor's CEO speculation of a pending management change at the company. The loss of a customer representing a significant portion of a companys gross sales. A former CFO of the company predicting long-term decline in the companys stock.

Question 50 of 67 Which of the following is not to be considered public information?

An earnings report posted on the companys website. An announcement of a new product in a press release.

Sales predictions made by the company president to a group of analysts during a tour of company facilities.

Question 51 of 67 Which of the following is the CORRECT manner for an individual to indicate that they hold the CFA designation?

I am a Chartered Financial Analyst. I am a CFA charterholder. I have been awarded a CFA degree by the CFA Institute.

Question 52 of 67 Which of the following procedures would help maintain the independence and objectivity of financial analysts when making investment decisions and taking investment actions? I. Requiring analysts to disclose all relationships with companies they cover. II. Requiring analysts to disclose all personal holdings or beneficial ownership of securities. III. Prohibiting analysts from accepting valuable gifts.

I and II. I and III. I, II and III.

Question 53 of 67 Which of the following statements clearly conflicts with the recommended procedures for compliance presented in the CFA Institute Standards of Practice Handbook?

Investment recommendations may be changed by an analyst without prior approval of a supervisory analyst. Personal transactions include transactions in securities owned by the employee and members of his or her immediate family and transactions involving securities in which the employee has a

beneficial interest. For confidentiality reasons, personal transactions should not be compared to those of clients or the employer unless requested by regulatory organizations.

Question 54 of 67 Which of the following statements is a recommendation of the Standards of Practice Handbook with regards to personal investing? I. Restrictions on participation in an IPO of equity or equity-related securities. II. Preclearance of all trades of significant value. III. Disclosure of all holdings in which the employee has a beneficial interest.

I and II. I and III. I, II and III.

Question 55 of 67 Which of the following statements is/are true regarding CFA Institute members' fiduciary duties according to the Standards of Practice Handbook? I. A member's fiduciary duty to a client includes a duty of loyalty. II.A member's fiduciary duty to a client includes a duty to exercise reasonable care when making investment decisions or taking investment action. III. Members should undertake investment decisions for the sole benefit of and in the best interests of the client.

I and II. II and III. I, II and III.

Question 56 of 67

Which of the following statements regarding research reports is/are true according to the CFA Institute Standards of Practice Handbook? I. Members should outline known limitations of their analysis. II. Reports should be supported by background and supporting information, and this information should be available to interested parties. III. Members must include all relevant factors in research reports.

I and II. I and III. II and III.

Question 57 of 67 Which of the following statements regarding supervisory responsibility is/are true under the CFA Institute Code and Standards: I.CFA Institute members exercise reasonable supervision by establishing and implementing written compliance procedures. II. Once compliance procedures are established, CFA Institute members must take reasonable steps to ensure that they are disseminated and enforced. III. Misconduct by a member's subordinate automatically results in a violation of the Code and Standards by the member for failing to properly supervise the employee.

I and II. II and III. I only.

Question 58 of 67 Which of these actions would be considered a violation of the standard on Market Manipulation?

Issuing false rumors about an investment to induce trading by others so you can benefit from the change in share price. Trading of low volume securities to exploit market inefficiencies

Selling a stock and immediately buying it back to capture specific tax incentives

Question 59 of 67 Which one of the following requirements will not help to ensure the fair treatment of brokerage firm clients when a new investment recommendation is made?

Limit the number of people in the firm who are aware in advance that a recommendation is to be disseminated. Establish procedures to ensure that institutional clients are informed of the new recommendation prior to smaller individual accounts. Minimize elapsed time between the decision and the dissemination of a recommendation.

Question 60 of 67 Which one of the following scenarios is most likely to be a violation of the CFA Institute Code and Standards:

A conviction for possession of drugs. Submitting false expense reimbursement forms. Personal bankruptcy.

Question 61 of 67 Which one of the following statements is false with respect to the payment of brokerage commissions according to the CFA Institute Code and Standards?

Brokerage commissions should be directed in the best interests of the client. Brokerage commissions may be directed to pay for securities research used in managing the client's portfolio. Brokerage commissions may be directed to pay for the investment manager's operating expenses.

Question 62 of 67 Which one of the following statements is INCORRECT:

Members must comply with the Code and Standards even when doing so would conflict with applicable law. Members must not engage in conduct that is legal if such conduct violates the Code and Standards. Members must comply with the Code and Standards, in the absence of any applicable law.

Question 63 of 67 Which one of these statements conflicts with the recommended procedures for compliance once a supervisor learns that a subordinate has violated the law?

The supervisor must promptly initiate an investigation to ascertain the extent of the wrongdoing. The supervisor may conclude the investigation and discontinue increased monitoring once the employee states that the misconduct will not recur. The supervisor should increase monitoring of the employee's activities.

Question 64 of 67 Youn is a successful money manager who is confident of her investment management ability and claims in her marketing brochures that her clients will obtain a significant return on principle by following her advice. Youns statement:

Misrepresents her ability as an investment manager. Improperly implies a guaranteed investment return. States an opinion and therefore cannot be a misrepresentation.

Question 65 of 67

Young, a CFA Institute member, is the research analyst responsible for following Night Prowler Security Systems, Inc. All the information he has accumulated and documented suggests the company's stock should be rated a weak "hold" because the demand for the firm's new products is poor. During a conversation with other analysts, he learns of takeover rumors regarding the company. Young immediately upgrades his recommendation to "buy" based on this new information. Young:

Violated CFA Institute Standards of Professional Conduct because he did not have a reasonable and adequate basis for his recommendation. Violated CFA Institute Standards of Professional Conduct by failing to distinguish between facts and opinions in his recommendation. Violated CFA Institute Standards of Professional Conduct because he did not seek approval of the change from his firm's compliance department.

Question 66 of 67 Zamorski, an investment manager, has a number of clients who have indicated that they do not wish to take on any additional risk in their portfolios. Zamorski attends a conference on a new type of derivative that has the potential to significantly increase portfolio performance but also increases the amount of risk to the portfolio. She invests in these new securities for all of her clients with great success. Zamorksi:

Has violated the Code and Standards by not following the investment parameters set forth by her clients. Has not violated the Code and Standards because the amount of additional risk incurred for her clients is well within the parameters that the clients can tolerate in her opinion. Has not violated the Code and Standards because the investment strategy she employed made money for her clients.

Question 67 of 67 Zeller and Toffler are both registered for the next offering of the Level III CFA exam. Zeller circulates a resume stating that he is a candidate for the CFA designation and has passed Level II of the CFA Program. Toffler circulates a resume stating that he is a CFA II. Which of the following statements are correct:

Both Zeller and Toffler have violated the Code and Standards. Only Zeller has violated the Code and Standards. Only Toffler has violated the Code and Standards.