Follow Us :

Ethical And Professional Standards - Ethical And Professional Standards Section 2

Avatto > > CFA Level 1 > > PRACTICE QUESTIONS > > Ethical And Professional Standards > > Ethical And Professional Standards Section 2

46. Ind Bank has recently started advisory services at its new branch in Nhasi located in an affluent neighborhood of high net worth individuals. To promote its services, the bank conducts a marketing drive and in one month signs up many clients. Ent Nes, an advisor at the bank, is meeting with a new client at the latter‟s home. The client wants to know if anyone from the community are Nes‟ clients and whether any private equity (PE) investments have been made. Nes boasts of the business he has garnered in the past month and says a few people have recently made PE investments, but does not reveal their names. Has Nes violated any Standard?

  • Option : A
  • Explanation : The assets managed by a firm is presented to clients, and is not confidential. Since no names or confidential details of the clients were disclosed, Standard III(E) is not violated.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *


47. Vishal Kachru, CFA, works as a research analyst with HDC Investments. On Saturdays, he gives lectures on leadership and brand building for three hours at a management school nearby. He is compensated well for this activity as an independent lecturer. Kachru ensures that he schedules this class only when he is not required at work. Did Kachru violate any Standard?

  • Option : B
  • Explanation : Since it does not interfere with his responsibilities at work, there is no violation.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *


48. Andrea Whistler, CFA is a research analyst at Awesome Investments. Among the list of stocks she covers is home e-tailer Fabnish, which was issued a buy recommendation recently. Whistler is also a passionate home décor blogger in her spare time. To promote their newly launched home décor section, Fabnish has approached Whistler to do an objective post on home improvement using the products on their site. She will be compensated through vouchers for this activity that can be redeemed on the site. Whistler does not inform her employer of this activity as it does not interfere with her work commitments. Did any violation take place?

  • Option : A
  • Explanation : Since Fabnish is a client covered as part of their research analysis, there is a conflict of interest. She was paid for her engagement which she should have disclosed to her employer. Refer to Standard IV(B) Additional Compensation Arrangements.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *


49. Aidan Ackermann, CFA, is recently hired as a banking analyst at Becker Investments. One of the mandates given by his supervisor Abigail Wohlers, is to improve the online presence of Becker among social media platforms. Ackermann posts regularly on the company‟s Facebook page and Twitter on the various services offered by Becker as well as snippets of the companies on his research list. He shares his buy/sell/hold recommendation in a brief manner on Twitter before the report is released to all clients. Wohlers is least likely to have violated the Standard relating to?

  • Option : C
  • Explanation : By not educating Ackermann of the compliance procedures for social media, and not supervising what was being posted online, Wohlers has violated Standard IV(C) Responsibilities of Supervisors. Ackermann also violated Standard III(B) Fair Dealing.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *


50. Dan Belkin works for Benedict Advisors. The firm advises and manages the portfolio of clients with various mandates. To cater to the increasing number of requests for diversification by including international equities, Belkin has been assigned the task of selecting a sub-adviser who specializes in this area. The selection must be made within the next six weeks. Belkin shortlists ten names from a database of fund managers who focus on this region. He eliminates those with a high expense ratio and a high turnover rate, and narrows the list to five. Due to shortage of time, Belkin has a brief interaction with each of the five fund managers to understand how they calculate returns, and does not go into their stock selection or due diligence process. He chooses the one with highest total returns in the past two years. In selecting the manager with highest returns, Belkin is most likely in violation of Standard relating to:

  • Option : A
  • Explanation : He is in violation of Standard V(A) Diligence and Reasonable basis because he did not make reasonable efforts to analyze all aspects such as stock selection process, fees, investment philosophy, assets under management, or experience before selecting an adviser. Belkin is also in violation of Standard III(C) Suitability by not analyzing if the chosen manager’s services are appropriate for the firm’s clients and if the fee structure is low relative to the services offered.
Cancel reply

Your email address will not be published. Required fields are marked *


Cancel reply

Your email address will not be published. Required fields are marked *


Related Quiz.
Ethical And Professional Standards Section 2