CFA Institute CFA Institute Certifications CFA-LEVEL-1 Questions & Answers

• Question 3581:

  Standard III (A) deals with ________.

  A. None of these answers

  B. Obligation to Inform Employer of Code and Standards

  C. Professional Misconduct

  D. Use of Professional Designation

  E. Plagiarism

  F. Duty to Employer

  G. Disclosure of Conflicts to Employer

  H. Fundamental Responsibilities

  Correct Answer: B

  Standard I deals with Fundamental Responsibilities. Standard II (A) deals with Use of Professional Designation. Standard II (B) deals with Professional Misconduct. Standard II (C) deals with Plagiarism. Standard III (A) deals with the Obligation to Inform Employer of Codes and Standards. Standard III (B) deals with the Duty to Employer. Standard III (C) deals with Disclosure of Conflicts to Employer.

• Question 3582:

  Standard III (D), Disclosure of Additional Compensation Arrangements is important because

  A. outside arrangements may affect loyalties and objectivity and create potential conflicts of interest.

  B. none of these answers.

  C. outside arrangements are not allowed under circumstances.

  D. third parties are inherently in competition with the current employer.

  E. the verbal disclosure requirement allows for "compensation in kind."

  F. all of these answers.

  Correct Answer: A

  Under Standard III (D), members must disclose outside compensation/benefits to employers because outside arrangements may affect loyalties and objectivity and create potential conflicts of interest. Disclosure thus allows an employer to consider the outside arrangements when evaluating the actions and motivations of members. Moreover, the employer is entitled to have full knowledge of compensation/benefit arrangements to assess the true cost of the outside services members are providing.

• Question 3583:

  Which of the following is/are required by AIMR-PPS with regards to creation and maintenance of composites?

  I. All actual fee-paying discretionary portfolios must be segregated into one or more composites based on similar investment strategies.

  II. Portfolios must not be switched from one composite to another unless documented changes in client guidelines make the switching appropriate.

  III.

  Composites must include all terminated portfolios while calculating performance for periods prior to the termination.

  A.

  II only

  B.

  I, II and III

  C.

  I and II only

  D.

  II and III only

  Correct Answer: D

  All actual fee-paying discretionary portfolios must be included in at least one composite based on similar investment strategy. Segregation of these accounts is not required. (II) and (III) are true.

• Question 3584:

  Standard II (B) - Professional Misconduct, states which of the following is a violation?

  A. Adding inappropriate expenses to expense reports over an extended period, although never criminally convicted.

  B. Using material prepared by another, in the same form as the original, without acknowledging and identifying the author, publisher or source of such material.

  C. All of these answers.

  D. Intoxication at work, which reflects poorly on the profession, raises questions about competence and affects investment decisions.

  Correct Answer: D

  Standard II (B) addresses personal integrity and prohibits individual behavior that reflects adversely on the entire profession. Intoxicated behavior falls under Standard II (B) because it reflects poorly on the member, his employer and the investment industry. Plagiarizing of material falls under Standard II (C) - Prohibition against Plagiarism.

• Question 3585:

  Which of the following is/are required by AIMR-PPS with regards to creation and maintenance of composites?

  I. Performance must be measured at least quarterly.

  II. Combining of assets-only returns with assets-plus-cash returns is prohibited.

  III.

  Convertible and hybrid securities cannot be mixed with money-market securities in performance calculations.

  A.

  I and III only

  B.

  I, II and III

  C.

  I only

  D.

  I and II only

  Correct Answer: D

  Section A - "Creation and Maintenance of Composites" - of the PPS requires that convertible and hybrid securities be treated consistently across all composites.

• Question 3586:

  Standard III includes which of the following?

  A. None of these answers

  B. Professional Misconduct

  C. Duty to Employer

  D. Prohibition against Plagiarism

  E. All of these answers

  F. Use of Professional Designation

  Correct Answer: C

  Standard III deals with Obligation to Inform Employer of Code and Standards, Duty to Employer, Disclosure of Conflicts to Employer, Disclosure of Additional Compensation Arrangements and Responsibilities of Supervisors.

• Question 3587:

  A(n) ________ is someone who has knowledge of pending or actual investment recommendations or action.

  A. covered person

  B. none of these answers

  C. AIMR member

  D. insider

  Correct Answer: A

  Access or covered persons have knowledge of pending or actual investment recommendations or action. The firm's definition of access (covered) person should be broad enough to cover all people with that knowledge.

• Question 3588:

  Standard IV (A.3) relates to two major components and is titled Independence and ________.

  A. Objectivity

  B. None of these answers

  C. Impartiality

  D. Autonomy

  E. Justice

  Correct Answer: A

  Standard IV (A.3) - Independence and Objectivity, states that members shall use reasonable care and judgment to achieve and maintain independence and objectivity in making investment recommendations or taking investment action.

• Question 3589:

  Trisdale is a portfolio manager who has consistently outperformed the market on a risk-adjusted basis for the past 3 years. As an appreciation for his work, one of his clients recently gave him a travel package to Vancouver worth around $5,000. Trisdale informed his supervisor about this gift and then took time off from work to enjoy a vacation in Vancouver. Trisdale has

  A. violated Standard III (D) - Disclosure of Additional Compensation Arrangements.

  B. violated Standard IV (A.3) - Independence and Objectivity.

  C. not violated the AIMR code of ethics.

  D. violated Standard IV (B.3) - Fair Dealing.

  Correct Answer: C

  The AIMR code of ethics does not preclude members from accepting gifts in excess of the modest amount of $100 from clients, as long as they are disclosed to the immediate supervisor. What the code does prohibit is acceptance of gifts in excess of $100 from parties that have a strong motive to influence the judgment of the members (e.g., companies that a member might be researching for investment recommendations). The disclosure of additional compensation arrangements with clients allows the supervisory authorities to monitor the portfolio activity and ensure that the gift-giving client's portfolio is not receiving any undue favorable treatment.

• Question 3590:

  Currency overlay portfolios must be valued at least ________.

  A. monthly

  B. yearly

  C. quarterly

  D. hourly

  E. daily

  Correct Answer: C

  In accordance with the AIMR-PPS, currency overlay portfolios must be valued at least quarterly, but because of the volatile nature of these portfolios, firms may need to revalue currency overlay portfolios more frequently than quarterly to obtain full and fair disclosure.