Ethical And Professional Standards MCQ - Ethical And Professional Standards Section 2

31 Raza Jaffery works as an independent analyst for the medical equipment industry. His reports are based on an analysis of customer interviews, manufacturers, on-site company visits, and secondary research from other analysts. Jaffery does not maintain any records or files for the information he collects but he mentions the source of his research in his reports. If the clients need information on the specific web sites, Jaffery always provides them with the relevant information. Jaffery most likely violated which of the following Standards?

Refer to Standard V(C) Record Retention. Jaffery must carefully document and maintain copies of all information that goes in his reports in order to avoid violation of Standard V(C).

32 Cora Bentley works for an investment counseling firm. She is approached by a new client Sue Grey for financial advice. Bentley very enthusiastically explains to her how she can increase her return by investing in a few small-cap stocks that are selling at a discount in the market. Has Bentley committed a violation of the CFA Institute Standards?

Bentley should determine whether the investment is suitable to the client’s financial situation. She should make an inquiry into the risk and return objectives of the client before making any recommendations. Refer to Standard III(C) Suitability.

33 Robert Brown is an analyst at Lazarus Investment Bank, which is one of the underwriters of Coolidge Inc. Brown discovers that the company has not given accurate earnings figures. The actual figures are much lower than the numbers presented. The preliminary prospectus has been distributed. Brown talks to his supervisor, who casually dismisses the matter. Brown requests his manager to assign him to another project. His action most likely conforms to which Standard?

Brown’s actions are in line with Standard I(A) Knowledge of the Law.

34 An independent analyst recommends a stock based on a 5-minute pre-market talk show by a reputed analyst, on the TV that morning. The recommendation is least likely a violation of:

There is no evidence of discrimination among clients. However, by recommending the stock without due diligence, the analyst has violated Standard V(A) Diligence and Reasonable Basis, and Standard III (C) Suitability.

35 Martina Bart, CFA, is working as a portfolio manager at a large global investment manager. Most of her clients are residents of a conservative country called Inara, where the new government has introduced a new law barring equity holdings in tobacco companies. Bart‟s clients have significant exposure to tobacco companies through international funds in their portfolio because of the handsome returns they have earned in the past. Three months have passed, Bart is unaware of the change in law and takes no action. According to the Standards, his inaction is:

If it is illegal to hold stocks of tobacco companies, Bart should have taken steps to stay informed of the applicable laws. Refer to Standard I(A) Knowledge of the Law.