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Ethical And Professional Standards MCQ - Ethical And Professional Standards Section 1

41 Which Standard requires Members and Candidates to make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients, and employers?

Refer to Standard VI(A) Disclosure of Conflicts

42 Cory Griffin, a Level II candidate, works as an investment advisor for Trust Mutual Fund. He specializes in commodities and informs his clients that the energy prices are going to rise due to political turmoil in the Middle East. He informs his broker at Xylan Mercantile to invest long in oil futures for him. Griffin should:

According to Standard VI(A) Disclosure of Conflicts, Griffin should disclose this personal transaction.

43 Klaus Matthias, CFA, works at Meinhard Capital, an investment and brokerage firm where he supervises a team that develops and markets fixed-income funds to cater to different high net worth clients internationally. Recently, due to the popularity of Islamic products he has asked his team to develop an Islamic Fund to market to his clients in the Middle East. The team includes three individuals who are all candidates in the CFA Program. After some research, they come up with a product that seems marketable to this specific niche. Before the distribution of the fund, Matthias is worried whether the Fund is suitable for all Islamic investors. Matthias should:

Refer to Standards I(A) Knowledge of the Law and III(C) Suitability. Members and candidates should understand that a single product cannot be suitable for all Islamic investors. The best way to deal with this situation is to clearly define which Islamic laws and regulations are being followed in the creation of the product and the types of investors for whom this fund will be suitable.

44 Nargis Dilawez, CFA, works as an independent research analyst and also uses various online social media sites to make announcements, recommendations, and analyses of various securities. She is a resident of Country S where there is no law against the posting of comments and opinions, but since her views are read globally she is worried about regulators in certain countries who impose restrictions and requirements on online communications. According to the Standards, Dilawez should:

According to Standard I(A) Knowledge of the Law Dilawez should adopt the stricter law.

45 Wynona Fritz works for Brady Brokerage as a fixed income analyst. She is also registered to take the Level III examination. After analyzing both the qualitative and quantitative aspects of Saber Inc., Fritz concludes that the company is not correctly rated by the credit rating agency and should be downgraded due to the leverage in its capital structure. A senior manager from the investment banking department informs her that Saber Inc. has chosen Brady Brokerage as one of the firms to underwrite and market their new bond issue. Fritz is concerned that her report will cause the company to terminate its relationship with Brady and affect her employment. According to the Standards, Fritz should:

Fritz should be independent and objective in her report. Alternatively, Brady Brokerage could place Saber Inc. on a restricted list and issue only factual information. Refer to Standard I(B) Independence and Objectivity.

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Misrepresentation

Investment professionals must not knowingly make false or misleading statements about analysis, recommendations, qualifications, services, or professional activities.

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Question:

Which of the following statements is most accurate according to the Standards of Practice Handbook? Members and Candidates:

A. who possess nonmaterial nonpublic information that could affect the value of an investment must not act or cause others to act on the information.
B. who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information.
C. who possess nonmaterial public information that could affect the value of an investment must not act or cause others to act on the information.

Correct answer: B

Explanation:

Refer to Standard II(A) Material Nonpublic Information.

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