CFA一级百题预测道德

10.
Ethical and Professional Standards

10.1. Ethics and Trust in the Investment Profession
10.1.1.
10.1.1.1. Definition:
➢ Ethics
◼ The guiding beliefs or ideals characterizing a society or societal group.
➢ Ethical conduct
◼ Behavior that follows moral principles and balances self-interest with both the
direct and the indirect consequences of the behavior on others.
➢ Code of ethics
◼ Specific communities or societal groups in which we live and work sometimes
codify their beliefs about obligatory and forbidden conduct in a written set
of principles, often called a code of ethics.
◼ Serves as a general guide for how community members should act.
➢ Standards
◼ Some communities will also expand on their codes of ethics and adopt explicit
rules or standards that identify specific behaviors required of community
members.
◼ Serve as benchmarks for the minimally acceptable behavior of community
members and can help clarify the code of ethics.
10.1.1.2. Ethics and professionalism
➢ Explain professionalism
◼ A profession is an occupational community that has specific education,
expert knowledge, and a framework of practice and behavior that underpins
community trust, respect, and recognition.
◼ The requirement to uphold high ethical standards is one clear difference
between professions and craft guilds or trade bodies.
◼ A primary goal of profession is to establish trust among clients and among
society in general.
:
➢ Common characteristics of professions to establish trust

育
◼ Professions normalize practitioner behavior.

教
◼ Professions provide a service to society.

程
◼ Professions are client focused.

金
◼ Professions have high entry standards.

◼ Professions possess a body of expert knowledge.
◼ Professions encourage and facilitate continuing education.
1-88
此预测为考点预测，考题仅为复习参考
内部使用资料，严禁传播，否则追究法律责任
◼ Professions monitor professional conduct.
◼ Professions are collegial, they should be respectful to each other, even when
they are competing.
◼ Professions are recognized oversight bodies.
◼ Professions encourage the engagement of members.
➢ Professions are evolving
◼ The investment management profession has become increasingly global,
driven by the opening of capital markets, coordination of regulation across
borders, and the emergence of technology.
➢ Investment management professionals are trusted to draw on a body of formal
knowledge and apply that knowledge with care and judgement.
➢ Investment management professionals are likely to encounter dilemmas,
including those with ethical implications.
➢ High ethical standards always matter and are of particular importance in the
investment management profession, which is based almost entirely on trust.
10.1.1.3. Challenges to ethical conduct
➢ Overconfidence can lead to faulty decision making.
➢ Situational influences have a very powerful and often unrecognized effect on our
thinking and behavior.
◼ External factors, such as environmental or cultural elements, that shapes our
thinking, decision making, and behavior.
◼ Factors: Money, Promotions, Prestige, Loyalty to employer and colleagues, a
strong compliance culture.
10.1.1.4. Trust
➢ Trust is the very foundation of the financial markets.
➢ Reasons:
◼ The nature of the client relationship
◼ Differences in knowledge and access to information
◼ The nature of investment products and services
10.1.1.5. Effects of ethical & unethical behavior
:
育
➢ Effects of ethical behavior:

◼ Lead to broader participation in the markets
教
◼ Protection of clients’ interests

程
◼ More opportunities for investment professionals and their firms

金
◼ Lead to higher levels of success and profitability

◼ Enjoy lower relative costs
➢ Effects of unethical behavior:
2-88
◼ Erodes and can even destroy trust
◆ Diminished trust in financial markets can reduce growth in the
investment industry and tarnish the reputation of firms and individuals
in the industry, even if they did not participate in the unethical behavior.
10.1.1.6. Legal and ethical conduct are not always the same.
➢ Many types of conduct are both legal and ethical, but some conduct may be one
and not the other.
➢ The law is not always the best mechanism to reduce unethical behavior.
◼ Laws typically follow market practices.
◼ Regulators’ responses typically take significant time, during which the
problematic practice may continue or even grow.
◼ A new law may be vague, conflicting, and/or too narrow in scope.
◼ Laws vary across countries or jurisdictions, allowing questionable practices to
move to places that lack laws relevant to the questionable practice.
◼ Laws are also subject to interpretation and compliance by market participants,
who may choose to interpret the law in the most advantageous way possible
or delay compliance until a later date.
➢ Ethical conduct goes beyond what is legally required and encompasses what
different societal groups or communities, including professional associations,
consider to be ethically correct behavior.
10.1.1.7. Framework for ethical decision making
➢ Steps are as follows:
◼ Identify: Relevant facts, stakeholders and duties owed, ethical principles,
conflicts of interest;
◼ Consider: Situational influences, additional guidance, alternative actions;
◼ Decide and act;
◼ Reflect: Was the outcome as anticipated? Why or why not?
10.1.2.
:
Which of the following statements is least accurate about Code of ethics? mock127
育
A． The shared principles and expected behaviors of a profession’s members.

教
B． The general guide for how community members should act.

程
C． The benchmarks for the minimally acceptable behavior.

金
The following choices describe the importance of trust except: 讲义改编

A． Since the nature of investment products and services is intangible, trust is essential to the
3-88
increase of investment willing.
B． Trust can be replaced by laws since laws are always the best mechanism to reduce unethical
behaviors.
C． Trust is the very foundation of the relationship between investors and investment managers.
10.2. The Process for the Enforcement of the Code and Standards
10.2.1.
10.2.1.1. The process for the enforcement of the code and standards
Inquiry is initiated
Written explanation from members/candidates
Investigation Collecting documents and records
Interview the member/candidates

No
disciplinary Violation
sanction occurred
Issue a Propose a disciplinary sanction

cautionary
Reject Accept
letter
The matter is referred to End

a panel composed of
DRC (Discipline Review
Committee) members
10.2.1.2. The CFA Institute board of governors maintains oversight and responsibility for the
Professional Conduct Program (PCP).
10.2.1.3. PCP and Disciplinary Review Committee (DRC) are responsible for enforcement of
the Code and Standards.
10.2.1.4. How to detect
➢ Self-disclosure
➢ Written complaints
➢ Public sources
➢ CFA exam proctor
:
育
10.2.1.5. The designated officer may decide

教
➢ That no disciplinary sanctions are appropriate.

程
➢ To issue a cautionary letter.

➢
金
To discipline the member or candidate.

10.2.1.6. Hearing panel
➢ If the member or candidate does not accept the charges and proposed sanction,
4-88
the matter is referred to a panel composed of DRC (Discipline Review Committee)
members.
➢ The hearing panel’s task is to determine whether a violation of the Code and
Standards occurred and, if so, what sanction should be imposed.
10.2.1.7. Sanctions public censure, suspension of membership and use
of the CFA designation, revocation of the CFA charter

10.2.1.8. AMC & Code and standards
➢ AMC was drafted specifically for firms.
➢ Code and standards is aimed at individual investment professionals.
10.2.1.9. Code of ethics
➢ Act with integrity, competence, diligence, respect, and in an ethical manner with
the public, clients, prospective clients, employers, employees, colleagues in the
investment profession, and other participants in the global capital markets.
➢ Place the integrity of the investment profession and the interests of clients above
their own personal interests.
➢ Use reasonable care and exercise independent professional judgment when
conducting investment analysis, making investment recommendations, taking
investment actions, and engaging in other professional activities.
➢ Practice and encourage others to practice in a professional and ethical manner
that will reflect credit on themselves and the profession.
➢ Promote the integrity and viability of the global capital markets for the ultimate
benefit of society.
➢ Maintain and improve their professional competence and strive to maintain and
improve the competence of other investment professionals.
10.2.2.
From the point of view of an investor, unethical behavior by investment professionals

can most likely lead to which of the following? 2017Mock
A. Increased willingness to accept risk.
:
育
B. Rise in the demand for investments.

教
C. Demand for a higher return.

程
金
Which of the following is not a component of the CFA Institute Code of

Ethics?2016Mock
A. Place the integrity of the investment profession and the interests of clients above your own
5-88
personal interests.
B. Practice and encourage others to practice in a professional and ethical manner that will reflect
credit on themselves and the profession.
C. Promote financial integrity and seek to prevent and punish abuses in the financial markets.
Carolina Ochoa, CFA, is the chief financial officer at Pantagonia Computing. Ochoa is
currently the subject of an inquiry by Pantagonia's corporate investigations department.
The inquiry is the result of an anonymous complaint accusing Ochoa of falsifying travel
expenses for senior management related to a government contract. According to the
CFA Institute Code of Ethics and Standards of Professional Conduct, it is most
appropriate for Ochoa to disclose the allegations: 2016Mock
A. on her Professional Conduct Statement.
B. to CFA Institute if the allegations are proven correct.
C. to CFA Institute when the investigation concludes.
An analyst in a rating agency has been accused of violations of Codes and Standards.
However, he refuses the charges and does not accept the proposed sanctions. Which of
the parties has the responsibility of dealing with this matter? 01
A. The hearing panel.

B. The CFA institute board of governors.
C. Professional Conduct Program.
Which of the following groups is most likely responsible for maintaining oversight and
responsibility for the Professional Conduct Program (PCP)? mock125
A. CFA Institute Board of Governors
B. Disciplinary Review Committee
C. Professional Conduct Division
10.3. Knowledge of the law

:
育
10.3.1.
教
10.3.1.1. Content
程
➢ (governing their professional activities)

金
expert on compliance;
➢ must comply with the more strict law, rule, or regulation;
6-88
➢ (knowingly)
10.3.1.2. Relationship between the code and standards and applicable Law
➢ ,
➢ law or regulation;
Comply with
More strict, less

Less strict
strict than Code → Code
more
Less strict More strict strict than Code →
10.3.1.3. Participation or association with violations by others
➢ (know) supervisor or
compliance department
disassociate and
document quit
➢ CFA Institute
(applicable law)
➢ Inaction combined with continuing association with those involved in illegal or

:
育
unethical conduct may be construed as participation or assistance in the illegal or

unethical conduct.
教
10.3.1.4. Investment Products and Applicable Laws

程
➢
金
7-88
➢ due diligence
10.3.1.5. Recommended Procedures for Compliance
◼ stay informed;
◼ encourage review;
◼ readily accessible current reference copies of applicable statutes, rules,
regulations;
◼ The formality and complexity of compliance procedures for firms depend on

the nature and size of the organization and the nature of its investment
operations;
◼ Develop or adopt a code of ethics, provide information on applicable laws,
establish procedures for reporting violations.
10.3.2.
James Woods, CFA, is a portfolio manager at ABC Securities. Woods has reasonable
grounds to believe his colleague, Sandra Clarke, a CFA Level II candidate, is engaged in
unethical trading activities that may also be in violation of local securities laws. Woods
is not Clarke's supervisor, and her activities do not impact Woods or any of the portfolios
for which he is responsible. Based on the Code and Standards, the recommended course
of action is for Woods to: (1912)
A. report Sandra Clarke to ABC's trading supervisor or compliance department.
B. not take any action because he is not directly involved.
C. report Sandra Clarke to the appropriate governmental or regulatory organization.
:
育
A central bank fines a commercial bank it supervises for not following statutory
教
regulations regarding nonperforming loan provisions on three large loans as a result of

程
the bank's loan provisioning policy. Louis Marie Buffet, CFA, sits on the board of
金
directors of the commercial bank as a non-executive director, representing minority

shareholders. He also chairs the bank's internal audit committee that determines the
loan provisioning policy of the bank. Mercy Gatabaki, CFA, is the bank's external auditor
8-88
and follows international auditing standards whereby she tests the loan portfolio by
randomly selecting loans to check for compliance in all aspects of central bank
regulations. Which charterholder is most likely in violation of the Code and Standards?
A. Gatabaki.
B. Buffet.
C. Both.
Linda Chin, CFA, is a member of a political group advocating less governmental

regulation in all aspects of life. She works in a country where local securities laws are
minimal and insider trading is not prohibited. Chin’s politics are reflected in her
investment strategy, where she follows her country’s mandatory legal and regulatory
requirements. Which of the following actions by Chin is most consistent with the CFA
Institute Standards of Professional Conduct?2013mock
A. Follow the CFA Code and Standards.
B. Continue her current investment strategy.
C. Disclose her political advocacy to clients.
10.4. Independence and Objectivity
10.4.1.
10.4.1.1. Content
➢ must use reasonable care and judgment to achieve and maintain independence
and objectivity in their professional activities.
➢ Must not offer, solicit, or accept any gift, benefit, compensation, or consideration
that reasonably could be expected to compromise their own or another’s
independence and objectivity.
10.4.1.2. Gifts from corporate and clients
➢ Best practice: Reject compromise independence and objectivity
Modest gift is OK, as long as its purpose is not to compromise the objectivity.
:
➢ modest
育
教
(not unusual arrangement)

程
➢ Gift from client , I(B).

金
10.4.1.3. Buy-side clients

9-88
➢ Sell-side analyst should not be pressured by buy-side firms to issue favorable
research on current or prospective investment-banking clients.
➢ It is improper for portfolio managers to threaten or engage in retaliatory
practices.
10.4.1.4. Fund manager relationships and Custodial Relationships
➢ Members and candidates who are responsible for hiring and retaining outside
managers should not accepts gifts, entertainment, or travel funding that may be
perceived as impairing their decisions.
➢ For meeting sponsored funds, members and candidates must review the merits
of each offer individually in determining whether they may attend yet maintain
their independence of conduct regarding the analytic process and the distribution
of their reports.
10.4.1.5. Investment banking
➢ Firewall between research and investment banking should be built to minimize
conflicts of interest.
◼ Separate reporting structures for personnel on the research side and
personnel on the investment banking side;
◼ Compensation should not link analyst remuneration directly to investment
banking assignments in which analyst may participate as a team member.
➢ It is appropriate to have analysts work with investment bankers only when the
conflicts are adequately and effectively managed and disclosed.
➢ Firms should also regularly review policies and procedures to determine whether
analysts are adequately safeguarded.
10.4.1.6. Performance measurement and attribution
➢ As performance analysts, their analysis may reveal instances where managers
may appeared to stray from their mandate.
➢ The performance analyst may receive requests to alter the construction of
composite indices due to negative results for a selected account or fund.
➢ The member or candidate must not allow internal or external influences to affect
their independence and objectivity as they faithfully complete their performance
:
育
calculation and analysis related responsibilities.

10.4.1.7. Public companies
教
➢ Analysts should not be pressured to issue favorable research by the companies

程
they follow. Can promise to cover the firm, should not promise favorable report
金
about the firm.

➢ Due diligence in financial research and analysis involves gathering information
from public disclosure documents and also company management and investor-
10-88
relations personnel, suppliers, customers, competitors, and other relevant
sources.
10.4.1.8. Credit rating agencies
➢ Members and candidates at rating agencies should ensure that procedures at the
agencies prevent undue influences from a sponsoring company during the
analysis.
➢ Abide by their agencies’ and the industry’s standards of conduct regarding the
analytical process and the distribution of their reports
➢ Develop the necessary firewalls and protections to allow the independent
operations of their different business lines.
➢ When using information provided by credit rating agencies, members and
candidates should be mindful of the potential conflicts of interest.
10.4.1.9. Influence during the manager selection/procurement process
➢ When hiring or firing of those who provide many business services beyond
investment management or when working to earn a new investment allocation,
members and candidates should not receive, solicit or offer gifts, contributions,
or other compensation to influence the decision of the hiring representative.
10.4.1.10. Issuer-paid research
➢ Analysts’ compensation for preparing such research should be limited, and the
preference is for a flat fee that is not linked to their conclusions or
recommendations (directly or indirectly).
➢ Must fully disclose potential conflict of interest, including the nature of
compensation. If not → misleading investors.
➢ Conduct a thorough analysis of the company’s financial statements based on
public information, benchmarking within a peer group, and industry analysis.
(Distinguish between fact and opinion).
10.4.1.11. Travel funding
➢ Best practice: always use commercial transportation rather than accept paid
travel arrangements from an outside company.
➢ Should commercial transportation be unavailable, members and candidates may
:
育
accept modestly arranged travel to participate in appropriate information-

gathering events, such as a property tour.
教
➢ May be influenced by discussions exclusively with the company executives when

程
flying on a corporate or chartered jet.

金
10.4.1.12. Social Activities

➢ When seeking corporate financial support for conventions, seminars, weekly
society luncheons, evaluate both the actual effect on independence and whether
11-88
objectivity might be perceived to be compromised in the eyes of clients.
10.4.1.13. issue
favorable research reports,
10.4.1.14. Procedures for compliance

➢ Protect the integrity of opinions: unbiased, design compensation systems with
integrity.
➢ Create a restricted list: if unwilling to issue unfavorable, put it on a restricted list
and only issue factual information.
➢ Restrict special cost arrangement: pay charges by themselves when visiting
headquarter, not reimbursed for air fees by corporate issuer, limit use firm’s
aircraft only when no commercial transportation. Should not always be hosted by
issuer.
➢ Limit gifts: Customary, business-related entertainment is okay as long as its
purpose is not to influence professional independence or objectivity;
local customs per gift or annual total amount.
➢ Restrict invesments: develop formal policies about employee purchases of equity

or equity-related ipos, require prior approval for employee to participate in ipos,
disclose timely investment actions following the offering, strict limit on
investment personnel acquiring securities in private placements.
➢ Review procedures: emplement effective supervisory and review procedures
about personal investment activities.
➢ Independence policy: formal written policy, not influenced by any parties that
could comprise their independence.
➢ Appointed officer: to supervise for compliance; provide procedures and policies
for reporting violation to every employee.
:
10.4.2.
育
Jennifer Ducumon, CFA, is a portfolio manager for high-net-worth individuals at

教
Northeast Investment Bank. Northeast holds a large number of shares in Babyskin Care
程
Inc., a manufacturer of baby care products. Northeast obtained the Babyskin shares
金
when they underwrote the company’s recent IPO. Ducumon has been asked by the
investment banking department to recommend Babyskin to her clients, who currently
do not hold any shares in their portfolios. Although Ducumon has a favorable opinion
12-88
of Babyskin, she does not consider the shares a buy at the IPO price nor at current price
levels. According to the CFA Institute Code of Ethics and Standards of Professional
Conduct the most appropriate action for Ducumon is to: mock125
A. ignore the request.
B. recommend the shares after additional analysis.
C. follow the request as soon as the share price declines.
Jiro Sato, CFA, deputy treasurer for May College, manages the Student Scholarship Trust.
Sato issued a request for proposal (RFP) for domestic equity managers. Pamela Peters,
CFA, a good friend of Sato, introduces him to representatives from Capital Investments,
which submitted a proposal. Sato selected Capital as a manager based on the firm's
excellent performance record. Shortly after the selection, Peters, who had outstanding
performance as an equity manager with another firm, accepted a lucrative job with
Capital. Which of the CFA charterholders violated the CFA Institute Standards of
Professional Conduct? ★2015Mock
A. Both.
B. Neither.
C. Peters.
Andrew Smith, CFA, works for Granite, a commercial bank that also has a sizable sell-
side research division. Smith is presenting financing solutions to a potential business
client, Dynamic Materials Corp. As part of his presentation, Smith mentions that Granite
will initiate research coverage on Dynamic. Is Smith's arrangement most likely
appropriate with regard to the Code and Standards? 2016Mock
A. No, because Smith cannot offer to provide research coverage on a company if it becomes a
Corporate finance client.
B. No, because Granite cannot provide research coverage on a corporate finance client because
it constitutes a violation of research independence.
C. Yes.
:
育
Dilshan Kumar, CFA, is a world-renowned mining analyst based in London. Recently, he

received an invitation from Cerberus Mining, a company listed on the London Stock
教
Exchange with headquarters in Johannesburg, South Africa. Cerberus asked Kumar to

程
join a group of prominent analysts from around the world on a tour of its mines in South
金
Africa, some of which are in remote locations and not easily accessible. The invitation
also includes an arranged wildlife safari to Krueger National Park for the analysts. Kumar
accepts the invitation, planning to visit other mining companies he covers in Namibia
13-88
and Botswana after the safari. To prevent violating any CFA Institute Standards of
Professional Conduct, it is most appropriate for Kumar to only accept which type of paid
travel arrangements from Cerberus? ★2014Mock
A. Flights on a private airplane to the remote mining sites in South Africa.
B. Economy class round trip ticket from London to Johannesburg.
C. Ground transportation to Krueger National Park.
10.5. Misrepresentation
10.5.1.
10.5.1.1. Content
➢ Must not knowingly make any misrepresentations relating to investment analysis,
recommendations, actions, or other professional activities. Once finding
misrepresentation (e.g. typographical error), correct the error as soon as possible,
or violate I (C).
➢ A misrepresentation is any untrue statement or omission of a fact or any
statement that is otherwise false or misleading.
◼ Must not knowingly omit or misrepresent information or give a false
impression of a firm, organization, or security in oral representations,
advertising (whether in the press or through brochures), electronic
communications, or written materials (whether publicly disseminated or
not).
◼ “Knowingly” means that either know or should have known that the
misrepresentation was being made or that omitted information could alter
the investment decision-making process.
◼ Should ensure that the analyses incorporate a broad range of assumptions—
from very positive scenarios to extremely negative scenarios.
10.5.1.2. Impact on investment practice
➢ specific return which is inherently volatile.
➢ Not prohibit from guaranteeing return which is built into the structure of the
:
育
product or for which an institution has agreed to cover any losses.

教
程
金
◼ 2% 2%
14-88
➢ “ ”
➢ misrepresent qualifications,
misrepresent
➢ outside managers must disclose intended use of external
managers, members and candidates must not represent outside managers’

investment practices as their own.
➢ Exercise care and diligence
investment professional
10.5.1.3. Omission
➢ The omission of a fact or an outcome can be misleading. Findings from models
shall not be presented as fact.
➢ Member and candidates should encourage their firms to develop strict policies
for composite development to prevent “cherry picking”.
10.5.1.4. Performance reporting
➢ Members and candidates may misrepresent the success of their performance
record.
➢ Clients can be misled if the benchmark’s results are not reported on a basis
comparable to that of the fund’s or client’s results.
➢ benchmark
➢ (illiquid securities)
Members and candidates

:
育
教
程
金
10.5.1.5. Social media
15-88
➢ Members and candidates
Code and Standards.
Standard I(C).
10.5.1.6. Plagiarism
➢ Plagiarism Copying or using in substantially the same form materials
prepared by others without acknowledging the source of the material or

identifying the author and publisher of such material.
➢ copy (or represent as their own) original ideas/material
acknowledge and identify the source of ideas/material.
➢ Using excerpts from others’ reports without acknowledgement; Citing
quotations as “leading analysts” and “investment experts” without naming

specific reference; Using charts and graphs without stating sources; Presenting
statistical estimates of forecasts prepared by others and identifying the sources
without including the qualifying statements or caveats that may have been used
Copying proprietary computerized spreadsheets or algorithms without

authorization; Preparation of research reports based on multiple sources without
acknowledging the sources.
➢
:
(credit or acknowledgement),
育
Plagiarism;
教
➢ plagiarism
程
金
I(C)
➢ , obtain the information directly from the author and cite only
16-88
that author use the information provided by the intermediary and cite both
sources only cite the information from the intermediary.
➢ misrepresentation,
misrepresentation.
10.5.1.7. Work completed for employer

➢ The firm retains the right to continue using the work completed after a member
or candidate has left the organization. issue future reports without
providing attribution to the prior analysts, reissue a
previously released report solely under his name.

10.5.1.8. Recommended procedures
➢ Factual presentations: written list of available services and a description of
qualifications
➢ Qualification summary: representations of qualifications
employee correspondence and documents.
➢ Verify outside information: verify,
. Encourage to develop policy to verify.
➢ Maintain webpage: ; Protect site’s integrity, confidentiality, and
security; not misrepresent and fully disclose.

➢ Plagiarism policy:
◼ maintain copies of all research reports with research ideas, material with
new methodologies, and other materials being relied on in preparing the
research report;
:
育
◼ attribute to sources any direct quotations, including projections, tables,

statistics, model/product ideas, and new methodologies prepared by
教
persons other than recognized financial and statistical reporting services or

程
similar sources.
金
◼ attribute to sources any paraphrases or summaries of material prepared by

others.
17-88
10.5.2.
Belen Zapata, CFA, is the owner of Kawah Investments. Kawah promises investors
returns of up to 12% per year and claims to achieve these returns by investing in non-
investment-grade bonds and other fixed-income instruments. Over the next 12 months,
bond market yields reach unprecedented lows and Zapata finds it impossible to achieve
the returns she expected. No investments are ever made by Kawah, and clients are
completely paid back all of their original investment. Zapata most likely violated the CFA
Institute Standards of Professional Conduct because of the: 2017Mock
A. investment mandate.
B. return of capital.
C. promised returns.
Solomon Sulzberg, CFA, is a research analyst at Blue Water Management. Sulzberg's

recommendations typically go through a number of internal reviews before they are
published. In developing his recommendations, Sulzberg uses a model developed by a
quantitative analyst within the firm. Sulzberg made some minor changes to the model
but retained the primary framework. In his reports, Sulzberg attributes the model to
both the quantitative analyst and himself. Before the internal reviews of his reports are
completed, Sulzberg buys shares in one of the companies. After the internal review is
complete, he fails to recommend the purchase of the stock to his clients and erases all
of his research related to this company. Sulzberg least likely violated the CFA Institute
Standards of Professional Conduct related to: ★2014Mock
A. Misrepresentation.
B. Record Retention.
C. Priority of Transactions.
Gabrielle Gabbe, CFA has been accused of professional misconduct by one of her
competitors. The allegations concern Gabbe's personal bankruptcy filing 10 years ago
when she was a college student and had a large amount of medical bills she could not
:
pay. By not disclosing the bankruptcy filing to her clients, did Gabbe most likely violate
育
any CFA Institute Standards of Professional Conduct? 2017Mock

教
A. No.
程
B. Yes, related to Misrepresentation.

金
C. Yes, related to Misconduct.
Jean-Luc Schlumberger, CFA, is an independent research analyst providing equity
18-88
research on listed companies. He incorporates factual information published by State
Statistics Bureau without acknowledging the source into the body of his research
reports. In addition, Schlumberger issues a buy recommendation of Baby-skin Care Inc.
basing on the conclusions and models from a well-known analyst Rebecca Wong’s
research without any indications or disclosures. Schlumberger has least likely violated
the Standards by? (mock 125 9 )
A. Using factual information published by State Statistics Bureau.

B. Using the conclusions from a well-known analyst.
C. Using the models established by a well-known analyst.
10.6. Misconduct
10.6.1
10.6.1.1 Scope of application
➢ (dishonesty, fraud, or deceit) professional
reputation, integrity, or competence misconduct.
➢ misconduct
➢ Excessive drinking at lunch during work that has negative effect on your ability to
make sound investment decisions is a violation of Standard I (D).
10.6.1.2 may not reflect on the integrity or trustworthiness of the person declaring
bankruptcy
➢ (fraudulent or deceitful business conduct)

:
育
10.6.1.3 Recommended procedures

教
➢ Code of ethics: every employee should subscribe and make clear that the
程
unethical activities will not be tolerated.

金
➢ List of violations: potential violations and associated disciplinary sanctions.

➢ Employee references: check potential employee’s character and eligible for work
in the investment industry because of past infractions of the law.
19-88
10.6.2
As a condition of his employment with an investment bank, Abasi Hasina, CFA, was
required to sign an employment contract, including a non-compete clause restricting
him from working for a competitor for three years after leaving the employer. After one
year, Hasina quits his job for a comparable position with an investment bank in a country
where non-compete clauses are illegal. Lawyers with whom he consulted prior to taking
the new position determined the non-compete clause was a violation of human rights
and thus illegal. Did Hasina most likely violate the CFA Institute Code of Ethics?
A. Yes.
B. No, because the non-compete clause violates his human rights.
C. No, because the non-compete clause is illegal in the new country of employment.
Abdul Naib, CFA, was recently asked by his employer to submit an updated document
providing the history of his employment and qualifications. The existing document on
file was submitted when he was hired five years ago. His employer notices the updated
version shows Naib obtained his MBA two years ago, whereas the earlier version
indicated he had already obtained his MBA at the time of his hire. Because the position
Naib was hired for had a minimum qualification of an MBA, Naib is asked to explain the
discrepancy. He justifies his actions by stating: "I knew you would not hire me if I did
not have an MBA, but I already had my CFA designation. Knowing you required an MBA,
I went back to school on a part-time basis after I was hired to obtain it. I graduated at
the top of my class, but this should not come as any surprise because you have seen
evidence I passed all of my CFA exams on the first attempt." Did Naib most likely violate
the CFA Institute Standards of Professional Conduct? 2014Mock
A. Yes, with regard to Misconduct.
B. No.
C. Yes, with regard to Reference to the CFA Designation.
:
Nicholas Bennett, CFA, is a trader at a stock exchange. Another trader approached

育
Bennett on the floor of the exchange and verbally harassed him about a poorly executed
教
trade. In response, Bennett pushed the trader and knocked him to the ground. After
程
investigating the incident, the exchange cleared Bennett from any wrongdoing. Which
金
of the following best describes Bennett's conduct in relation to the CFA Institute Code
of Ethics or Standards of Professional Conduct? Bennett: 2015 Mock
A. violated the standard relating to professionalism.
20-88
B. did not violate any of the Code of Ethics or Standards of Professional Conduct.
C. violated both the standard relating to professionalism and integrity of capital markets.
10.7. Material Nonpublic Information
10.7.1
10.7.1.1 Content: MNI MNI
10.7.1.2 material : substance and specificity
determines the materiality

➢ Company-related information
◼ Earnings.
◼ M&A, acquisitions, tender offers, or joint ventures.
◼ Changes in assets, Changes in management.
◼ Innovative products, processes, or discoveries.
◼ New licenses, patents, registered trademarks, or regulatory
approval/rejection of a product.
◼ Developments regarding customers or suppliers.
◼ Changes in auditor notification.
◼ Events regarding the issuer’s securities.
◼ Bankruptcies.
◼ Significant legal disputes.
◼ New or changing equity or debt rating issued by third party
➢ Government reports of economic trends
➢ Orders for large trades before they are executed
➢ Reports from well known analyst
➢ Qualified personnel: information about trials of a new drug, product, or service
under development from qualified personnel involved in the trials is likely to be
material, whereas educated conjecture by subject experts not connected to the
trials is unlikely to be material.
:
育
➢ MNI.
教
10.7.1.3
程
金
➢ material.
➢ Suppliers
21-88
MNI Mosaic
material.
➢ public
can use for trading .
➢ can’t use.
➢ Selective disclosure may violate MNI. If MNI was disclosed selectively, the listed
company should issue a press release or reach public dissemination.
10.7.1.4 members or candidats
Standard II(A)
Standard II(A).
10.7.1.5 Mosaic theory material public information and non-material non-public
information save and document all the research.
10.7.1.6 Social media: Members and
candidates Members and candidates
standard II(A)
10.7.1.7 Industry expert Members and candidates
material nonpublic information

:
育
material nonpublic information members and

教
程
candidates
金
10.7.1.8 Investment Research Reports: Simply because the public in general find the conclusions
material does not require that the analyst make his/her work public. Investors who are
not clients of the analyst can either do the work themselves or become clients of the
22-88
analyst for access to the analyst’s expertise.
10.7.1.9 Achieve public dissemination
➢ If material, should try to achieve public dissemination.
➢ Encourage the firm to make it public, if not possible, report only to designated
supervisory and compliance personnel within her firm.
➢ not invest on MNI, or induce insider to disclose MNI.
➢ Recommended procedures - Adopt compliance procedures
➢ Encourage firms to adopt compliance procedures to prevent the misuse of MNI.
➢ Particularly important is improving compliance in such areas as the review of
employee and proprietary trading, documentation of firm procedures, and the
supervision of interdepartmental communications in multi-service firms.
➢ Compliance procedures should suit the particular characteristics of a firm,
including its size and the nature of its business.
10.7.1.10 Adopt disclosure procedures
➢ members and candidates should encourage the development of and compliance
with procedures for distributing new and updated investment opinions to clients.
➢ Recommendations of this nature may represent material market moving
information that needs to be communicated to all clients fairly.
10.7.1.11 Issue press releases
➢ Companies should consider issuing press releases prior to analyst meetings and
conference calls and scripting those meetings and calls to decrease the chance
that further information will be disclosed.
➢ If MNI is disclosed for the first time in an analyst meeting or call, the company
should promptly issue a press release or otherwise make the information publicly
available.
10.7.1.12 Firewall Elements
➢ substantial control of interdepartmental communications, preferably through a
clearance area in either the compliance or legal department;
➢ Review of employee trading through the maintenance of “watch,” “restricted,”
and “rumor” lists;
:
育
➢ Documentation of the procedures designed to limit the flow of information

between departments and of the actions taken to enforce those procedures;
教
➢ heightened review or restriction of proprietary trading while a firm is in

程
possession of material nonpublic information.

金
10.7.1.13 Physical separation of departments

10.7.1.14 Prevention of personnel overlap
10.7.1.15 A reporting system
23-88
➢ Authorized people review and approve communications between departments.
➢ Consult a designated compliance officer to determine whether sharing the
information is necessary and how much information should be shared.
➢ If the sharing is necessary, the compliance officer should coordinate the process
of “looking over the wall”.
➢ A single supervisor or compliance officer should have the specific authority and
responsibility of deciding whether or not information is material and whether it
is sufficiently public to be used as the basis for investment decisions.
➢ Ideally, the officer is independent.
10.7.1.16 Personal trading limitations.
➢ Consider restrictions or prohibitions on personal trading and carefully monitor
proprietary trading and personal trading.
➢ Require employees to make periodic reports of their own transactions and
transactions made for the benefit of family members.
➢ Securities should be placed on a restricted list when a firm has or may have MNI.
➢ A watch list shown to only the few people responsible for compliance should be
used to monitor transactions in specified securities.
10.7.1.17 Record maintenance.
➢ Multi-service firms should maintain written records of the communications
between various departments.
➢ Firms should place a high priority on training and should consider instituting
comprehensive training programs, particularly for employees in sensitive areas.
10.7.1.18 Proprietary trading procedures ( )
➢ Monitor and restrict proprietary trading when holding MNI.
➢ MNI Proprietary trading
◼ market maker, remain passive to the market, take only the
contra side of unsolicited customer trades;

◼ In risk arbitrage trading, best to stop; If not stop, prove the adequacy of their
:
育
internal procedures and must document firm trades.

10.7.1.19 Communication to all employees.
教
➢ Written compliance policies and guidelines should be circulated to all employees

程
of a firm.
金
➢ Policies and guidelines should be used in conjunction with training programs

aimed at enabling employees to recognize MNI.
➢ Sufficient training to either make an informed decision or to realize they need to
24-88
consult a supervisor or compliance officer before engaging in questionable
transactions.
10.7.2
According to the CFA Institute Code of Ethics and Standards of Professional Conduct,
trading on material nonpublic information is least likely to be prevented by establishing:
(1912)
A. personal trading limitations.
B. selective disclosure.
C. firewalls.
While waiting in the business class lounge before boarding an airplane, Becca Msafari,
CFA, an equity analyst, overhears a conversation by a group of senior managers,
including members of the board, from a large publicly listed bank. The managers discuss
staff changes necessary to accommodate their regional expansion plans. Msafari hears
several staff names mentioned. Under what circumstances could Msafari most likely use
this information when making an investment recommendation to her clients? She can
use the information: (1912)
A. If the discussed changes are unlikely to affect investor perception of the bank.
B. Under no circumstances.
C. If she does not breach the confidentiality of the names of the staff.
When a client asks her how she makes investment decisions, Petra Vogler, CFA, tells the
client she uses mosaic theory. According to Vogler, the theory involves analyzing public
and nonmaterial nonpublic information, including the evaluation of statements made
to her by company insiders in one-on-one meetings in which management discusses
new earnings projections not known to the public. Vogler also gathers general industry
information from industry experts she has contacted. Vogler most likely violates the CFA
Institute Standards of Professional Conduct because of her use of: ★2014Mock
:
A. nonmaterial nonpublic information.

育
B. one-on-one meeting information.

教
C. industry expert information.

程
金
Edo Ronde, CFA, an analyst for a hedge fund, One World Investments, is attending a key
industry conference for the microelectronics industry. At lunch in a restaurant adjacent
to the conference venue, Ronde sits next to a table of conference attendees and is able
25-88
to read their nametags. Ronde realizes the group includes the president of a publicly
traded company in the microelectronics industry, Fulda Manufacturing, a company
Ronde follows. Ronde overhears the president complain about a production delay
problem Fulda's factories are experiencing. The president mentions that the delay will
reduce Fulda's earnings by more than 20% during the next year if not solved. Ronde
relays this information to the portfolio manager he reports to at One World explaining
that in a recent research report he recommended Fulda as a buy. The manager asks
Ronde to write up a negative report on Fulda so the fund can sell the stock. According
to the CFA Institute Standards of Professional Conduct, Ronde should least likely:
(1916 )
A. request the portfolio manager not act on the information.

B. leave his research report as it is.
C. revise his research report.
10.8. Market Manipulation
10.8.1
10.8.1.1 Content: Members and Candidates must not engage in practices that distort prices or
artificially inflate trading volume with the intent to mislead market participants.
10.8.1.2 The intent of the action is critical to determine whether it is a violation of this
standard.
II(B);
II(B).
10.8.1.3 (information based) (transaction based)

:
育
➢ Info-based: spreading false or misleading information.

教
➢ Transaction-based: transactions that deceive or would be likely to mislead market

程
participants by distorting the price-setting mechanism of financial instruments.

金
10.8.2
Justin Blake, CFA, a retired portfolio manager, owns 20,000 shares of a small public
26-88
company that he would like to sell because he is worried about the company's prospects.
He posts messages on several internet bulletin boards. The messages read, "This stock
is going up once the pending patents are released, so now is the time to buy. The stock
is a buy at anything below $3. I have done some close research on these guys."
According to the Standards of Practice Handbook, Blake most likely violated the Code
and Standards associated with: 2017Mock
A. Integrity of Capital Markets, but not Conflicts of Interest.
B. neither Integrity of Capital Markets nor Conflicts of Interest.
C. Integrity of Capital Markets, and Conflicts of Interest.
Which of the following actions violate the Standard relating to market manipulation?
A. Entering large buy and sell trades between multiple proprietary accounts of the firm with the
intent to increase trading volume.
B. Exploiting perceived market inefficiencies through aggressive trading strategies.
C. Placing the securities mentioned as material nonpublic information on the firm’s restricted
trading list.
10.9. Loyalty, Prudence and Care
10.9.1.
10.9.1.1. loyalty, prudence, and care
➢ members and candidates
loyalty, prudence, and care
Code and Standards members and
candidates
:
育
➢ Standard III(A) members and candidates

教
10.9.1.2.
程
➢ Use their skills and diligence to execute trades in the most favorable terms that
金
can be achieved.
27-88
10.9.1.3.
➢ The extent of the advisory arrangement and limitations should be outlined in the
agreement with the client at the outset of the relationship.
objectives and risk tolerances,
10.9.1.4.
➢ Individuals: An investment manager manages the personal assets of an individual.

➢ Beneficiary: When the manager is responsible for the portfolios of pension plans
or trusts, the client is the beneficiaries of the plan or trust. The duty of loyalty is
owed to the ultimate beneficiaries.
➢ Mandate: In some situations, the actual client or beneficiaries may not exist.
Members and candidates managing a fund to an index or an expected mandate
owe the duty of loyalty, prudence, and care to the stated mandate.
➢ Investing public: The client may be the investing public as a whole, the goals of
independence and objectivity of research surpass the goal of loyalty to a single
organization.
10.9.1.5. Develop client’s portfolios
➢ Should ensure that the client’s objectives and expectations of the account are
realistic and suitable to their circumstances and that the risks involved are
appropriate.
➢ Recommended investment strategies should relate to the long-term objectives
and circumstances of the client.
➢ investment manager or the firm conflict with the best interests
and objectives of the client.

➢ Must follow any guidelines set by their clients for asset management.
➢ portfolio.
10.9.1.6. Soft commission policies

:
育
➢ “Soft dollars” or “soft commissions” should benefit clients, not investment

manager.
教
➢ If pay a higher commission without corresponding benefit to the client, violate.

程
➢ “directed brokerage” is ok, but still obligated to seek “best price” and “best
金
execution”, and be assured by the client that the goods or services purchased
from the brokerage will benefit the account beneficiaries. In addition, should
disclose to the client that the client may not be getting best execution from the
28-88
directed brokerage.
➢ “Best execution” refers to a trading process that seeks to maximize the value of
the client’s portfolio within the client’s stated investment objectives and
constraints. directed brokerage
10.9.1.7. Proxy Voting Policies

➢ vote without considering the impact of the question, or votes blindly with
management on non-routine governance issues may violate III(A).
➢ vote proxies
cost–benefit analysis ,
➢ Should determine who is authorized and for the benefit of beneficiaries, should
disclose any change in voting proxy policy.
10.9.1.8. Regular account information should submit to each client, at least quarterly, an
itemized statement showing:
➢ The funds and securities in the custody or possession plus all debits, credits, and
transactions that occurred during the period;
➢ Where the assets are to be maintained, as well as where or when they are moved;
➢ Should separate the client’s assets from any others’ and their own assets.
10.9.1.9. Client approval.
➢ If uncertain, should ask what he/she would expect or demand if the
member/candidate was the client.
➢ If in doubt, should disclose questionable matter in writing to the client and obtain
client approval.
10.9.1.10. Should diversify unless diversification is not consistent with plan guidelines or
is contrary to the account objectives
10.9.2.
:
育
Beth Kozniak, a CFA candidate, is an independent licensed real estate broker and a well-
教
known property investor. She is currently brokering the sale of a commercial property
程
on behalf of a client in financial distress. If the client's building is not sold within 30 days,
金
he will lose the building to the bank. A year earlier, another client of Kozniak's had
expressed interest in purchasing this same property. However, she is unable to contact
this client, and she has not discovered any other potential buyers. Given her distressed
29-88
client's limited time frame, Kozniak purchases the property herself and forgoes any sales
commission. Six months later, she sells the property for a nice profit to the client who
had earlier expressed interest in the property. Has Kozniak most likely violated the CFA
Institute Standards of Professional Conduct? (1916 )
A. Yes, she did not disclose her potential conflicts of interest to either client.
B. Yes, she profited on the real estate to the detriment of her financially stressed client.
C. No.
Jack Steyn, CFA, recently became the head of the trading desk at a large investment
management firm that specializes in domestic equities. While reviewing the firm's
trading operations, he notices clients give discretion to the manager to select brokers
on the basis of their overall services to the management firm. Despite the client
directive, Steyn would most likely violate Standard III(A): Loyalty, Prudence, and Care if
he pays soft commissions for which of the following services from the brokers?
A. Database services for offshore investments.
B. Equity research reports.
C. Investment conference attendance.
Jorge Lopez, CFA, is responsible for proxy voting on behalf of his bank's asset
management clients. Lopez recently performed a cost–benefit analysis that showed the
proxy-voting policies might not benefit the bank's clients. As a result, Lopez immediately
changes the proxy-voting policies and procedures without informing anyone. Lopez now
votes client proxies on the side of management on all issues, with the exception of
major mergers in which a significant impact on the stock price is expected. Lopez least
likely violated the CFA Institute Standards of Professional Conduct in regard to:
A. cost-benefit analysis.
B. voting with management.
C. proxy-voting policy disclosures.
:
Henrietta Huerta, CFA, writes a weekly investment newsletter to market her services
育
and obtain new asset management clients. A third party distributes the free newsletter
教
on her behalf to those individuals on its mailing list. As a result, it is widely read by
程
thousands of individual investors. The newsletter recommendations reflect most of

金
Huerta's investment actions. After completing further research on East-West Coffee

Roasters, Huerta decides to change her initial buy recommendation to a sell. To avoid
violating the CFA Institute Standards of Professional Conduct, it would be most
30-88
appropriate for Huerta to distribute the new investment recommendation to:
A. newsletter recipients and asset management clients simultaneously.
B. asset management clients first.
C. newsletter recipients first.
Sanjay Gupta, CFA, is interviewed by the First Faithful Church to manage the church’s
voluntary retirement plan’s equity portfolio based upon his superior return history. Each
church staff member chooses whether to opt in or out of the retirement plan according
to his or her own investment objectives. The plan trustees tell Gupta that stocks of
companies involved in the sale of alcohol, tobacco, gambling, or firearms are not
acceptable investments given the objectives and constraints of the portfolio. Gupta tells
the trustees he cannot reasonably execute his strategy with these restrictions and that
all his other accounts hold shares of companies involved in these businesses because
he believes they have the highest alpha. By agreeing to manage the account according
to the Trustees’ wishes, does Gupta violate the CFA Institute Standards of Professional
Conduct? 2013Mock
A. No.
B. Yes, because the manager was hired based upon his previous investment strategy.
C. Yes, because the restrictions provided by the Trustees are not in the best interest of the
members.
10.10. Fair Dealing
10.10.1
10.10.1.1 Fair equal treat clients equally fair dealing.
10.10.1.2
:
:
育
10.10.1.3 Investment recommendation brief update report, by

教
程
addition to or deletion from a recommended list, or simply by oral communication

金
all clients have a fair opportunity to act on every recommendation.
➢ disclosure of inequitable allocation system, even accepted by

31-88
clients, can’t be exempt from fair dealing for disclosure and acceptance. Disclose
trade allocation procedures disclosure of inequitable allocation
methods does not relieve the member of this obligation.

10.10.1.4 Should not give favored clients advance information when such advance notification
may disadvantage other clients. hot issue,
fair dealing;
10.10.1.5 Once this distribution has occurred, the member or candidate may follow up
separately with individual clients. e-mail
fair dealing;
10.10.1.6 Investment action

➢ When making investments in new offerings or in secondary financings, should
distribute the issues to all customers who are suitable for the investment and
consistent with the policies of allocating blocks of stock.
➢ oversubscribed issues round-lot basis forgo any sales to themselves or
immediate families in order to free up additional shares for clients→not violate.

➢ If the investment professional’s family-member accounts are managed similarly
to the accounts of other clients of the firm, these accounts should not be excluded
from buying such shares.
➢ Must make every effort to treat all individual and institutional clients in a fair and
impartial manner.
➢ Disclose to clients and prospective clients the documented allocation procedures
in place and how the procedures would affect them.
➢ Should not take advantage of their position to the detriment of clients.
10.10.1.7 Recommended procedures
➢ Limit the number of people who are privy to the fact that a recommendation is
going to be disseminated.
:
育
➢ Shorten the time frame between decision and dissemination, disseminate a short
summary report including the conclusion might be published in advance.
教
➢ Publish guideline for pre-dissemination behavior.

程
➢ Communicate recommendations both within the firm and to customers

金
simultaneously.
➢ Maintain a list of clients and their holdings.
➢ Processing and executing orders on a first-in, first-out basis.
32-88
➢ Giving all client accounts participating in a block trade the same execution price
and charging the same commission.
➢ When the full amount of the block order is not executed, allocating partially
executed orders among the participating client accounts pro rata on the basis of
order size while not going below an established minimum lot size for some
securities.
➢ Allocate partially executed orders among client accounts pro rata based on order
size (not account size), not below a minimum lot size.
➢ When allocating trades for new issues, obtaining advance indications of interest,
allocating securities by client (rather than portfolio manager), and providing for a
method for calculating allocations.
10.10.2
Charlie Mancini, CFA, is the Managing Director for Business Development at SV Financial,
(SVF), a large U.S.-based mutual fund organization. Mancini has been under pressure
recently to increase revenues. In order to secure business from a large hedge fund
manager based in Asia, Mancini recently approved flexible terms for the fund's client
agreement. To allow for time zone differences, the agreement permits the hedge fund
to trade in all of SVF's mutual funds six hours after the close of U.S. markets, which is
prohibited by U.S. regulators. Did Mancini violate any CFA Institute Standards of
Professional Conduct? (1912)
A. No.
B. Yes, with regard to Fair Dealing and Material Nonpublic Information.
C. Yes, with regard to Fair Dealing.
Heidi Halvorson, CFA, is the chief investment officer for Tukwila Investors, an asset
management firm specializing in fixed-income investments. Tukwila is in danger of
losing one of its largest clients, Quinault Jewelers, which accounts for nearly one-third
of its revenues. Quinault recently told Halverson that Tukwila would be fired unless the
:
performance of Quinault's portfolio improves significantly. Shortly after this

育
conversation, Halvorson purchases two corporate bonds she believes are suitable for
教
any of her clients based on third-party research from a reliable and diligent source.
程
Immediately after the purchase, one bond increases significantly in price while the
金
other bond declines significantly. At the end of the day, Halvorson allocates the
profitable bond trade to Quinault and the other bond to two of her largest institutional
accounts. Halvorson most likely violated the CFA Institute Standards of Professional
33-88
Conduct in regard to: (1912)
A. client suitability.
B. third-party research.
C. trade allocations..
Miranda Grafton, CFA, purchased a large block of stock at varying prices during the
trading session. The stock realized a significant gain in value before the close of the
trading day, so Grafton reviewed her purchase prices to determine what prices should
be assigned to each specific account. According to the Standards of Practice Handbook,
Grafton's least appropriate action is to allocate the execution prices: 2017Mock
A. across the participating client accounts at the same execution price.
B. across the participating client accounts pro rata on the basis of account size.
C. on a first-in, first-out basis with consideration of bundling orders for efficiency.
Sheila Schleif, CFA, is an equity analyst at an investment banking division of Mokara

Financial Group, a full service financial group. Schleif uses a multifactor computer model
to make stock recommendations for all clients of Mokara. Schleif discovers the model
contains an error. If the error were corrected, her most recent buy recommendation
communicated to all clients would change to a sell. Schleif corrects the error, changing
the buy to a sell recommendation, and then simultaneously distributes via e-mail the
revision to all investment banking clients who received the initial recommendation. A
week later, Schleif sells the same shares she held in her personal portfolio. Concerning
her actions, Schleif most likely violated which of the following CFA Institute Standards
of Professional Conduct? 2014mock
A. Priority of Transactions. 
B. Diligence and Reasonable Basis.  
C. Fair Dealing.  
Monique Gretta, CFA, is a research analyst at East West Investment Bank. Previously,
Gretta worked at a mutual fund management company and has a long-standing client
:
育
relationship with the managers of the funds and their institutional investors. Gretta
often provides fund managers, who work for Gretta's former employer, with draft copies
教
of her research before disseminating the information to all of the bank's clients. This
程
practice has helped Gretta avoid several errors in her reports, and she believes it is
金
beneficial to the bank's clients, even though they are not aware of this practice.
Regarding her research, Gretta least likely violated the CFA Institute Standards of
34-88
Professional Conduct because: (1906 )
A. the long-standing client relationships are not disclosed.

B. this practice benefits all clients.
C. her report is a draft.
10.11 Suitability
10.11.1
10.11.1.1 Content
➢ When in an advisory relationship
◼ Make a reasonable inquiry into a client or prospective client’s investment
experience, risk and return objectives, and financial constraints prior to
making any investment recommendation or taking investment action, must
reassess and update regularly.
◼ Determine that an investment is suitable to the client’s financial situation
and consistent with written objectives, mandates, and constraints before
making an investment recommendation or taking investment action.
◼ Judge the suitability in the context of the client’s total portfolio.
➢ When responsible for managing a portfolio
◼ must only make investment recommendations or take investment actions
that are consistent with the stated objectives and constraints of the
portfolio.
10.11.1.2 Developing an investment policy
➢ In an advisory relationship, must gather client information at the inception of the
relationship.
10.11.1.3 Understanding the client’s risk profile
➢ One of the most important factors to be considered in matching appropriateness
and suitability of an investment with a client’s needs and circumstances is
measuring that client’s tolerance for risk.
10.11.1.4 Updating an investment policy
:
育
➢ Updating the IPS should be repeated at least annually and also prior to material
教
changes to any specific investment recommendations.

程
10.11.1.5 The need for diversification

➢
金
An investment with high relative risk may be suitable in the context of the entire
portfolio or when the client’s stated objectives contemplate speculative or risky
investments.
35-88
➢ The manager may be responsible for only a portion of the client’s total portfolio,
or the client may not have provided a full financial picture.
◼ Members and candidates can be responsible for assessing the suitability of
an investment only on the basis of the information and criteria actually
provided by the client.
10.11.1.6 Managing to an index or mandate
➢ Responsibility is to invest in a manner consistent with the stated mandate.
➢ Those who manage pooled assets to a specific mandate are not responsible for
any individual investor.
◼ Only those who have advisory relationship are responsible for individual
clients.
10.11.1.7 Addressing unsolicited trade requests. The member or candidate should refrain from
making the trade until he or she discusses the concerns with the client.
➢ An unsolicited request may be expected to have only a minimum impact on the
entire portfolio because the size of the requested trade is small or the trade would
result in a limited change to the portfolio’s risk profile.
◼ Necessary client approval is needed for executing unsuitable trades.
◼ At a minimum, the client should acknowledge the discussion and accept the
conditions that make the recommendation unsuitable.
➢ When unsolicited request is expected to have a material impact on the portfolio,
the member or candidate should use this opportunity to update the investment
policy statement.
◼ Some clients that decline to modify their policy statements while insisting an
unsolicited trade be made. Members or candidates will need to evaluate the
effectiveness of their services to the client and ultimately determine
whether they should continue the advisory arrangement with the client.
◼ Some firms may allow for the trade to be executed in a new unmanaged
account.
10.11.1.8 Developing an investment policy
➢ Gather client information at the inception of the advisory relationship.
:
育
➢ Information should be incorporated into a written investment policy statement

(IPS).
教
10.11.1.9 Updating an investment policy

程
➢ Repeated at least annually and also prior to material changes.

金
➢ Client should fully disclose complete financial portfolio, including those portions
not managed by the member or candidate,
36-88
suitability analysis. Analysis only based on provided information.
10.11.1.10 Investment Policy Statement, in formulating an investment policy for the client,
the member or candidate should take the following into consideration.
➢ Client identification—(1) type and nature of client, (2) the existence of separate
beneficiaries, and (3) approximate portion of total client assets under
management.
➢ Investor objectives—(1) return objectives and (2) risk tolerance.
➢ Investor constraints—(1) liquidity needs, (2) expected cash flows, (3) investable
funds, (4) time horizon, (5) tax considerations, (6) regulatory and legal
circumstances, (7) investor preferences, prohibitions, circumstances, and unique
needs, and (8) proxy voting responsibilities and guidance.
➢ Performance measurement benchmarks.
10.11.1.11 Regular updates
➢ Objectives and constraints should be maintained and reviewed periodically to
reflect any changes in the client’s circumstances.
➢ Should regularly compare constraints with capital market expectations to arrive
at an appropriate asset allocation.
➢ Annual review is reasonable unless business or other reasons, such as a major
change in market conditions, dictate more frequent review.
➢ Should document attempts to carry out review if circumstances prevent it.
➢ The suitability test procedures should require the investment professionals to
look beyond the potential return of the investment and include the following:
◼ An analysis on the impact on the portfolio’s diversification.
◼ A comparison of the investment risks with the client’s assessed risk tolerance.
◼ The fit of the investment with the required investment strategy.
10.11.2
IPS should be updated repeatedly at least:
A. Annually.
:
育
B. Semi-annually.
教
C. Quarterly.
程
金
Molly Burnett, CFA, is a portfolio manager for a fund that only invests in environmentally
friendly companies. A multinational utility company recently acquired one of the fund's
best-performing investments, a wind power company. The wind power company's
37-88
shareholders received utility company shares as part of the merger agreement. The
utility has one of the worst environmental records in the industry, but its shares have
been one of the top performers over the past 12 months. Because the utility pays a high
dividend every three months, Burnett holds the utility shares until the remaining two
dividends are paid for the year then sells the shares. Burnett most likely violated the
CFA Institute Standard of Professional Conduct concerning: (1912)
A. Independence and Objectivity.
B. Suitability.
C. Disclosure of Conflicts.
Leng Bo, CFA, is a bond portfolio manager for individual investors. Last year, a client
whose portfolio is limited to investment-grade bonds approved Bo's purchase of a
below-investment-grade bond. Because yields in the high-grade fixed-income markets
declined, Bo subsequently decides to enhance the client's portfolio by investing in
several additional bonds with ratings one or two notches below investment grade. The
investment strategy implemented by Bo most likely violated which of the following CFA
Institute Standards of Professional Conduct? 2017Mock
A. Independence and Objectivity.
B. Suitability.
C. Communication with Clients and Prospective Clients.
Sherry Buckner, CFA, manages equity accounts for government entities whose portfolios
are classified as being conservative and risk averse. Since the objective of her clients is
to maximize returns with the lowest possible risk, Buckner considers adding to their
holdings a new, thinly traded, leveraged derivative product that she believes has the
potential for high returns. To make her investment decision, Buckner relies upon
comprehensive research from an investment bank with a solid reputation for top quality
research. After her review of that research, Buckner positions her accounts so each has
a 10% allocation to the derivative product. Did Buckner most likely violate any CFA
Institute Standards of Professional Conduct by purchasing the derivative product for her
:
育
clients? 2017Mock
A. No.
教
B. Yes, related to Suitability.

程
C. Yes, related to Loyalty, Prudence, and Care.

金
Kelly Amadon, CFA, an investment adviser, has two clients: Ryan Randolf, 65 years old,
and Keiko Kitagawa, 45 years old. Both clients earn the same amount in salary. Randolf,
38-88
however, has a large amount of assets, whereas Kitagawa has few assets outside her
investment portfolio. Randolf is single and willing to invest a portion of his assets very
aggressively; Kitagawa wants to achieve a steady rate of return with low volatility so she
can pay for her child's current college expenses. Amadon recommends investing 20% of
both clients' portfolios in the stock of very low-yielding small-cap companies. Amadon
least likely violated the CFA Institute Standards of Professional Conduct in regard to his
investment recommendations for: 2014Mock
A. only Randolf's portfolio.
B. only Kitagawa's portfolio.
C. both clients' portfolios.
10.12 Performance Presentation
10.12.1
10.12.1.1 Should be accurate, complete and fair;

➢ Not misrepresent past performance or reasonably expected performance.
➢ ;
➢ Include terminated portfolio as part of performance history.

➢ Weighted rate of return rather than a single performance.
10.12.1.2 If the presentation is brief.
➢ Make available to clients and prospects, on request, the detailed information
supporting that communication.
➢ Best practice: brief presentations include a reference to the limited nature of the
information provided.
10.12.1.3 apply GIPS standards GIPS Compliance without
applying GIPS standards. Can also meet obligations under Standard III(D) by:
➢ Considering the knowledge and sophistication of the audience to whom a
performance presentation is addressed.
➢ Presenting the performance of the weighted composite of similar portfolios
:
育
rather than using a single representative account.

➢ Including terminated accounts as part of performance history with a clear
教
indication of when the accounts were terminated.

程
➢
金
Including disclosures that fully explain the performance results being reported:
Performance
39-88
record from prior entity? Gross of fees (investment management fee), net of fees,
or after tax?
➢ Maintaining the data and records.
10.12.2
Sam Snead, CFA, is the founder and portfolio manager of the Everglades Fund. In its first
year the fund generated a return of 30%. Building on the fund’s performance, Snead
created new marketing materials that showed the fund’s gross 1-year return as well as
the 3-, and 5-year returns which he calculated by using back-tested performance
information. As the marketing material is used only for presentations to institutional
clients, Snead did not mention the inclusion of back-tested data. According to the
Standards of Practice Handbook, did Snead violate any CFA Institute Standards of
Professional Conduct? 2010Mock
A. No.
B. Yes, because he did not disclose the use of back-tested data.
C. Yes, because he failed to deduct all fees and expenses before calculating the fund’s track
record.
Which of the following is an appropriate benchmark? ( )
A. Select a small-cap stocks index as a benchmark for high risk-averse clients.

B. Display hedge fund’s performance to clients who mainly invest in money market securities.
C. Suggest clients who have high risk aversion take S&P500 index as return objective.
Kyle Taylor of Taylor Trust Company, noting the performance of Taylor’s common trust
fund for the past two years, states in a brochure sent to his potential clients, “You can
expect steady 25% annual compound growth of the value of your investments over the
year.” Taylor Trust’s common trust fund did increase at the rate of 25% per year for the
past year, which mirrored the increase of the entire market. The fund has never
averaged that growth for more than one year, however, and the average rate of growth
:
育
of all of its trust accounts for five years is 5% per year. Tylor least likely violates the CFA
教
Institute Standard of Professional Conduct concerning: case

程
A. Performance presentation.
金
B. Misrepresentation.
C. Suitability.
40-88
10.13 Preservation of Confidentiality
10.13.1.
10.13.1.1. Keep information about current, former, and prospective clients confidential
unless
➢ The information concerns illegal activities on the part of the client;
➢ Disclosure is required by law; or
➢ The client or prospective client permits disclosure of the information.
10.13.1.2. III(E) is applicable when
➢ Receiving information because of special ability to conduct a portion of the
client’s business or personal affairs, and
➢ Receiving information that arises from or is relevant to that portion of the client’s
business that is the subject of the special or confidential relationship.
10.13.1.3. Status of client
➢ Maintain the confidentiality of client records even after the client relationship has
ended. If a client or former client expressly authorizes the disclosure, may follow
the terms of the authorization and provide the information.
10.13.1.4.
➢ If applicable law requires disclosure of client information in certain circumstances,

members and candidates must comply with the law.
➢ If applicable law requires maintaining confidentiality, even if the information
concerns illegal activities on the part of the client, should not disclose.
➢ When in doubt, should consult with compliance personnel or legal counsel before
disclosing confidential information about clients.
10.13.1.5. Electronic information and security
➢ Not require members or candidates to become experts in information security
technology, but they should have a thorough understanding of the policies of their
employers.
10.13.1.6. When permissible under applicable law, shall consider the PCP an extension of
themselves when requested to provide information about a client in support of a PCP
:
育
investigation into their own conduct

教
➢ Encouraged to cooperate with investigations into the conduct of others.

程
➢ Any information turned over to the PCP is kept in the strictest confidence.
➢
金
Will not be considered in violation of this standard by forwarding confidential

information to the PCP.
10.13.1.7. The simplest, most conservative and effective way to comply with III(E) is to avoid
41-88
disclosing any information received from a client except to authorized fellow
employees who are also working for the client.
10.13.1.8. Electronic information and security:
Members and candidates
10.13.1.9. Communication to clients: Members and candidates
10.13.1.10. In some instances, may want to disclose information from clients that is outside
the scope of the confidential relationship and does not involve illegal activities.
Before making such a disclosure, should ask the following:
➢ In what context was the information disclosed? If disclosed, is the information
relevant to the work?
➢ Is the information background material that, if disclosed, will enable better
service to the client?
10.13.1.11. Communication with clients: Members and candidates should be diligent in
discussing with clients the appropriate methods for providing confidential
information. It is important to convey to clients that not all firm-sponsored resources
may be appropriate for such communications.
10.13.2.
Danielle Deschutes, CFA, is a portfolio manager who is part of a 10-person team that
manages equity portfolios for institutional clients. A competing firm, South West
Managers, asks Deschutes to interview for a position with its firm and to bring her
performance history to the interview. Deschutes receives written permission from her
:
current employer to bring the performance history of the stock portfolio with her. At
育
the interview, she discloses that the performance numbers represent the work of her
教
team and describes the role of each member. To bolster her credibility Deschutes also
程
provides the names of institutional clients and related assets constituting the portfolio.
金
During her interview, Deschutes most likely violated the CFA Institute Standards of
Professional Conduct with regard to: (1912)
A. her contribution to the portfolio's returns.
42-88
B. providing details of the institutional clients.
C. the stock portfolio's performance history.
While at a bar in the financial district after work, Ellen Miffitt, CFA, overhears several
employees of a competitor discuss how they will manipulate down the price of a thinly
traded micro-cap stock's price over the next few days. Miffitt's clients have large
positions of this stock, so when she arrives at work the next day, she immediately sells
all of these holdings. Because she had determined the micro-cap stock was suitable for
all of her accounts at its previously higher price, Miffitt buys back her client's original
exposure at the end of the week at the new, lower price. Which CFA Institute Standards
of Professional Conduct did Miffitt least likely violate? 2017Mock
A. Material Nonpublic Information.
B. Preservation of Confidentiality.
C. Market Manipulation.
Teresa Staal, CFA, is an investment officer in a bank trust department. She manages
money for celebrities and public figures, including an influential local politician. She
receives a request from the politician's political party headquarters to disclose his stock
holdings. The request indicates local law requires the disclosure. What steps should
Staal most likely take to ensure she does not violate any CFA Institute Standards of
Professional Conduct? 2016 Mock
A. Provide the information and inform her client.
B. Check with her firm's compliance department to determine her legal responsibilities.
C. Send the requested documents and inform her supervisor.
10.14 Loyalty to Employer
10.14.1
10.14.1.1 Core rule is not to injure the firm, deprive of its profit, or deprive of the employee’s
advantage of ability and skills.
:
10.14.1.2 Independent practice

育
➢ “Undertaking independent practice” means engaging in competitive business, as

教
opposed to making preparations to begin such practice.

程
➢ Should abstain from independent competitive activity that could conflict with the
金
interests of their employer,
◼ Types of services they will render to prospective independent clients,
43-88
◼ The expected duration of the services,
◼ The compensation for the services,
➢ independent practice.
10.14.1.3 (whistleblowing)
➢ Personal interests, and interests of employer, are secondary to protecting the

integrity of capital markets and the interests of clients.
When an employer is engaged in illegal or unethical activities, activities that

would normally violate a member’s/candidate’s duty to his/her employer (such
as contradicting employer instructions, violating certain policies and procedures,
or preserving a record by copying employer records) may be justified.
10.14.1.4 (independent contractors)
(oral or written agreement)
10.14.1.5
➢ (misappropriation) (trade secrets)
➢ (misappropriation) client lists Memorizing client lists (name and
address) is not permitted, unless the info does not come from the records of
former employer or violate non-compete agreement.
➢ (misuse) (confidential information)
➢ (solicit)
:
➢ (misappropriation)
育
➢ Self-dealing (appropriating for one’s own property a business opportunity or

教
程
information belonging to one’s employer),

金
10.14.1.6
44-88
➢ Violation of terms in existing non-compete contract
➢ Taking records or files (even rejected idea list) to a new employer without the
written permission of the previous employer
10.14.1.7
the skills and experience that an employee obtained while
employed are not “confidential” or “privileged” information.

➢ IV(A) does not prohibit experience or knowledge gained at one employer from
being used at another employer.
10.14.1.8 unless deemed such by contract or law;
10.14.1.9
10.14.1.10 Protocol for broker recruiting:
➢ Individuals are allowed to take some general client contact information when
departing.
➢ A copy of the information the individual is taking must be provided to the local
management team for review.
➢ The specific client information may only be used by the departing employee and
not others employed by the new firm.
10.14.1.11 Use of social media: loyalty to employer
➢
:
育
教
程
10.14.1.12 Competition policy:

金
➢ Must understand any restrictions placed by the employer on offering similar

services outside the firm while still employed.
➢ If an employer elects to have its employees sign a non-compete agreement,
45-88
should ensure that the details are clear and fully explained prior to signing the
agreement.
10.14.1.13 termination policy:
➢ Should establish clear procedures regarding the resignation process, including

addressing how the termination will be disclosed to clients and staff.
➢ May also outline the procedures for transferring responsibilities of ongoing
research responsibilities and account management.
10.14.1.14 incident-reporting procedures
➢ Should be aware of firm’s policies related to whistleblowing and encourage firms

to adopt industry best practices. Many firms are required by regulatory mandates
to establish confidential and anonymous reporting procedures that allow
employees to report potentially unethical and illegal activities in the firm.
➢ Firms are encouraged to adopt a standardized classification structure for
employees and indicate how each of the policies applies to each employee class.
10.14.2
Jimmy Lan, CFA, is a technology analyst at Pacific Securities, Inc. and is a leading
authority on Japanese technology companies. Lan's clients include many leading
Japanese equity managers. While still employed at Pacific, Lan makes plans during the
weekends to start a new company, JL Consulting. His plans consist of contracting office
space, interviewing potential employees, and purchasing office equipment. Once he
feels ready to launch his new firm, Lan provides Pacific with his resignation notice. After
leaving, Lan constructs earnings models of the technology companies he previously
covered, using the knowledge and experience gained while at Pacific. He then contacts
former clients by using public sources and encourages them to become clients of his
new firm. Are Lan's actions in compliance with the Code and Standards?16Mock
A. No, because the names of former clients, modeling skills, and experience gained by Lan are
confidential information of Pacific Securities.
:
育
B. Yes, assuming he is not in breach of any non-compete agreement signed while at Pacific
Securities.
教
C. No, because he is prohibited from engaging in activities related to starting his new business
程
while still employed by Pacific Securities.

金
Marc Davidson, CFA, works as a trust specialist for Integrity Financial. Davidson starts a
part-time consulting business providing advice to trustees for a fee. He conducts this
46-88
business on his own time and therefore did not notify Integrity Financial of his
consulting. Davidson asks his assistant to compile a list of Integrity's clients and their
contact information. The following month, Davidson is offered a similar role at
Integrity's largest competitor, Legacy Trust Services, Inc. After he begins working at
Legacy, his new manager arranges for him to meet with a number of prospective clients,
many of whom are clients of Integrity. After meeting with Davidson, a number of former
Integrity clients decide to transfer their business to Legacy. Did Davidson's action violate
the Code and Standards? (1912)
A. Yes, both Davidson's part-time consulting business and his meetings with Integrity clients are
violations of the Standards.
B. Yes, Davidson's part-time consulting business is a violation of the Standards.
C. No.
Elbie Botha, CFA, an equity research analyst at an investment bank, disagrees with her
research team's buy recommendation for a particular company's rights issue. She
acknowledges the team's recommendation is based on a well-developed process and
extensive research, but she feels the valuation is overpriced based on her assumptions.
Despite her contrarian view, her name is included on the research report to be
distributed to all of the investment bank's clients. To avoid violating any CFA Institute
Standards of Professional Conduct, it would be least appropriate for Botha to undertake
which of the following? ★ 2014Mock
A. Insist her name be removed from the report.
B. Leave her name on the report.
C. Issue a new report.
Chris Rodriguez, CFA, is a portfolio manager at Nisqually Asset Management, which

specializes in trading highly illiquid shares. Rodriguez has been using Hon Securities
Brokers almost exclusively when making transactions for Nisqually clients, as well as for
his own relatively small account. Hon always executes Rodriguez's personal trades at a
more preferential price than for Rodriguez's clients' accounts. This special pricing occurs
:
育
regardless of whether or not Rodriguez personally trades before or after clients.

Rodriguez should least likely do which of the following in order to comply with the CFA
教
Institute Standards of Professional Conduct? (1912)

程
A. Trade client accounts before his own account.

金
B. Eliminate the exclusive trading arrangement.

C. Average trade prices across all trading accounts.
47-88
Which of the following is most likely correct regarding the use of social media account?
A. To promote asset management business, members and candidates can create specific
accounts and user profiles for themselves.
B. Members and candidates can keep social media accounts created by their former employers
since personal profiles have been developed on public platforms.
C. There is no need for members and candidates to discuss with their employers how profiles
should be treated when a single account includes personal connections since employees can
maintain separate accounts for their personal social media activities.
10.15 Additional Compensation Arrangement
10.15.1
10.15.1.1 No gifts, benefits, compensation or consideration are to be accepted
obtain written consent from all parties
involved.
10.15.1.2 (No arrangement without the employer's
approval) (immediate written
report) (amount and nature of consideration)
10.15.1.3
10.15.1.4 Make an immediate written report to employer specifying any compensation they
propose to receive for services in addition to the compensation or benefits received
from their employer.
10.15.1.5 The details of the report should be confirmed by the party offering the additional
compensation, including performance incentives by clients.
10.15.1.6 Members and candidates must obtain permission for additional compensation or
benefits because such arrangements may affect loyalty and objectivity and create
:
育
potential conflicts of interest.

教
10.15.1.7 The written report should state the terms of any agreement under which a member
程
or candidate will receive additional compensation.

➢
金
Include the nature of the compensation, the approximate amount of

compensation, and the duration of the agreement.
48-88
10.15.2
Jefferson Piedmont, CFA, a portfolio manager for Park Investments, plans to manage the
portfolios of several family members in exchange for a percentage of each portfolio's
profits. Because his family members have extensive portfolios requiring substantial
attention, they have requested that Piedmont provide the services outside of his
employment with Park. Piedmont notifies his employer in writing of his prospective
outside employment. Two weeks later, Piedmont begins managing the family members'
portfolios. By managing these portfolios, which of the following CFA Institute Standards
of Professional Conduct has Piedmont violated? 2015Mock
A. Conflicts of Interest.
B. Additional Compensation.
C. Both Additional Compensation and Conflicts of Interest.
When Abdullah Younis, CFA, was hired as a portfolio manager at an asset management
firm two years ago, he was told he could allocate his work hours as he saw fit. At that
time, Younis served on the board of three non-public golf equipment companies and
managed a pooled investment fund for several members of his immediate family. Younis
was not compensated for his board service or for managing the pooled fund. Younis's
investment returns attract interest from friends and co-workers who persuade him to
include their assets in his investment pool. Younis recently retired from all board
responsibilities and now spends more than 80% of his time managing the investment
pool for which he charges non-family members a management fee. Younis has never
told his employer about any of these activities. To comply with the CFA Institute
Standards of Professional Conduct with regard to his business activities over the past
two years, Younis would least likely be required to disclose which of the following to his
employer? ★2014Mock
A. Family investment pool management.
B. Board activities.
C. Non-family member management fees.
:
育
10.16 Responsibility of Supervisors

教
10.16.1
程
金
10.16.1.1 Make reasonable efforts to detect and prevent violations by anyone subject to their
supervision.
10.16.1.2 establishing and implementing the written compliance system and ensuring
49-88
such system is followed through periodic review reasonable supervision.
10.16.1.3 What an adequate system is.
10.16.1.4 delegate
instruct how to detect and prevent the violations of laws,
rules and code.
10.16.1.5 inadequate (corrective)
10.16.1.6 nonexistent (poor)
until the firm adopts adequate system.
10.16.1.7 Once knowing a potential violation, supervisor must promptly initiate an

investigation.
➢ Relying on employee’s statements or assurances that the wrongdoing will not
recur is not enough.
➢ Reporting the misconduct up the chain of command and warning the employee
to cease the activity are also not enough.
➢ Should take steps to ensure that the violation will not be repeated, by placing
limits on the employee’s activities or increasing the monitoring of the employee’s
activities.
10.16.1.8 Detection procedures
➢ If adopted reasonable procedures and took steps to institute an effective
compliance program, may not violate IV(C) if he does not detect violations that
occur despite these efforts.
➢ May violate IV(C) if he knows or should know that the procedures designed to
detect and prevent violations are not being followed.
10.16.1.9 Enforcement of non-investment-related policies.
:
育
➢ Those who have supervisory responsibility should enforce policies related to

教
investment and non-investment-related activities equally.

程
➢ Establish policies related to attendance and acceptable workplace actions, such

金
as mandatory vacations for specific positions.

10.16.1.10Adequate procedure.
➢ Be clearly written and tailored to the firm’s operations;
50-88
➢ In plain language, easy to understand;
➢ Designate a compliance officer;
➢ Describe hierarchy of supervision and assign duties among supervisors;
➢ Create a system of checks and balances;
➢ Outline the scope of the procedures and procedures to document the monitoring
and testing of compliance procedures;
➢ Outline permissible conduct;
➢ Delineate procedure for reporting violations and sanctions.
10.16.1.11Once the compliance program is instituted, the supervisor should:
➢ Disseminate the contents of the program to personnel;
➢ Periodically update procedures to ensure that the measures are adequate under
the law;
➢ Continually educate personnel regarding compliance procedures;
➢ Issue periodic reminders of procedures to personnel;
➢ Incorporate professional conduct evaluation in employee’s performance review;
➢ Review the actions of employees;
➢ Take steps to enforce procedures once violation occurred.
10.16.1.12Once violation is discovered, a supervisor should
➢ Promptly respond;
➢ Thoroughly investigate to determine the scope of the wrongdoing;
➢ Increase supervision or place appropriate limitations on the wrongdoer pending
the outcome of the investigation.
10.16.2
Francesca Ndenda, CFA, and Grace Rutabingwa work in the same department for New
Age Managers, with Rutabingwa reporting to Ndenda. Ndenda learns that Rutabingwa
received a Notice of Enquiry from the Professional Conduct Program at CFA Institute
regarding a potential cheating violation when she sat for the CFA exam in June. As
Rutabingwa's supervisor, Ndenda is afraid that Rutabingwa's behavior will be seen as a
:
violation of the Code and Standards. Does Ndenda most likely have cause for concern?
育
(1906 )
教
程
A. Yes.
金
B. No, because her responsibilities do not apply.

C. No, not until Rutabingwa is found guilty of cheating.
51-88
Mariam Musa, CFA, head of compliance at Dunfield Brokers, questions her colleague
Omar Kassim, a CFA candidate and a research analyst, about his purchase of shares in a
company for his own account immediately before he publishes a "buy"
recommendation. He defends his actions by stating he has done nothing wrong because
Dunfield does not have any personal trading policies in place. The CFA Institute
Standards of Professional Conduct were most likely violated by: (1912)
A. only Musa.
B. only Kassim.
C. both Musa and Kassim.
Madeline Smith, CFA, was recently promoted to senior portfolio manager. In her new
position, Smith is required to supervise three portfolio managers. Smith asks for a copy
of her firm's written supervisory policies and procedures but is advised that no such
policies are required by regulatory standards in the country where Smith works.
According to the Standards of Practice Handbook, Smith's most appropriate course of
action would be to: ★2017Mock
A. require her firm to adopt the CFA Institute Code of Ethics and Standards of Professional
Conduct.
B. decline to accept supervisory responsibility until her firm adopts procedures to allow her to
adequately exercise such responsibility.
C. require the employees she supervises to adopt the CFA Institute Code of Ethics and Standards
of Professional Conduct.
Eileen Fisher, CFA, has been a supervisory analyst at SL Advisers for the past 10 years.
Recently, one of her analysts was found to be in violation of the CFA Institute Standards
of Professional Conduct. Fisher has placed limits on the analyst's activities and is now
monitoring all of his investment activities. Although SL did not have any compliance
procedures up to this point, to avoid future violations, Fisher has put in place
procedures industry standards. Did Fisher most likely violate any CFA Institute Standards
of Professional Conduct? 2016Mock
:
育
A. No, because she is taking steps to implement compliance procedures that are more than
adequate.
教
B. Yes.
程
C. No, because she has taken steps to ensure the violations will not be repeated by the analyst.
金
Kim Klausner, CFA, monitors several hundred employees as head of compliance for a
large investment advisory firm. Klausner has always ensured that his company's
52-88
compliance program met or exceeded those of its competitors. Klausner, who is going
on a long vacation, has delegated his supervisory responsibilities to Sue Chang. Klausner
informs Chang that her responsibilities include detecting and preventing violations of
any capital market rules and regulations and the CFA Institute Standards of Professional
Conduct. Klausner least likely violated the CFA Institute Standards of Professional
Conduct by failing to instruct Chang to also consider: ★2014Mock
A. industry standards.
B. firm policies.
C. legal restrictions.
10.17 Diligence and Reasonable Basis
10.17.1
10.17.1.1 The requirements for research conclusions vary in relation to the role in investment
decision-making process, but must make reasonable efforts to cover all pertinent
issues when arriving at a recommendation.
10.17.1.2 Provide supporting information to clients → enhance transparency
10.17.1.3 Defining diligence and reasonable basis.
➢ In providing investment service, often use a variety of resources.
➢ current stage of the industry’s business cycle; company’s operating and
financial history; mutual fund’s fee structure and management history; output
and potential limitations of quantitative models; quality of the assets included in
a securitization; appropriateness of selected peer-group comparisons.
➢ Can base decisions only on the information available at the time the decision is
made. The steps taken in developing a diligent and reasonable recommendation
should minimize unexpected downside events.
10.17.1.4 Secondary or third-party research
➢ Criteria in forming an opinion on whether research is sound, if suspect the
soundness, must not rely on that information.

:
育
➢ May rely on others in the firm to determine soundness and use the information
in good faith assuming the due diligence process was deemed adequate.
教
➢ Should verify that the firm has a policy about the timely and consistent review of
程
approved research providers to ensure the quality of the research.

金
➢ If such policy not in place, should encourage development and adoption.

10.17.1.5 Quantitatively oriented research
➢ Need to have an understanding of the parameters used in the model or
53-88
quantitative research.
➢ Although not required to be experts in technical aspects of the models, must be
able to explain to their clients the importance of the quantitative research and
how the results were used in the decision-making process.
➢ Need to consider the time horizon of data input in financial models.
➢ In development of a recommendation, may need to test the models by using
volatility and performance expectations that represent scenarios outside the
observable databases.
➢ In reviewing computer models or the resulting output, pay attention to the
assumptions and rigor of the analysis to ensure that the model incorporates
negative market events.
members and
candidates
➢ members and candidates
10.17.1.6 Selecting external advisers and subadvisers
➢ Ensure that the firm has standardized criteria for reviewing external advisers,
:
育
◼ Reviewing the adviser’s established code of ethics;

教
◼ Understanding the adviser’s compliance and internal control procedures;

程
◼ Assessing the quality of the published return information;

◼ Reviewing the adviser’s adherence to its stated strategy.
金
10.17.1.7 Group research

➢ The conclusions or recommendations of the group report represent the
54-88
consensus of the group, but may not necessarily be the views of the member or
candidate, even though his name is included on the report.
➢ consensus opinion has a reasonable and adequate basis
and is independent and objective need not decline to be identified with
the report.
➢ not confident in the process, should dissociate from the
report whether it does not reflect his opinion or not.

➢ Always recommending “hot” issue indicates without sound analysis→ NO
reasonable basis.
10.17.1.8 Establish a policy requiring that research reports, credit ratings, and investment
recommendations have a basis that can be substantiated as reasonable and
adequate.
10.17.1.9 Develop detailed, written guidance for analysts and review committees for judging
reasonable and adequate basis of a particular recommendation.
10.17.1.10Develop measurable criteria for assessing the quality of research, the
reasonableness and adequacy of the basis for any recommendation or rating, and
the accuracy of recommendations over time.
10.17.1.11Develop detailed, written guidance that establishes minimum levels of scenario
testing of all computer-based models used in developing, rating, and evaluating
financial instruments.
10.17.1.12Develop measurable criteria for assessing outside providers.
➢ Adopt a standardized set of criteria for evaluating the adequacy of external
advisers. The policy should include how often and on what basis the allocation of
funds to the adviser will be reviewed.
10.17.2
Kirsten Kelso, CFA, is a research analyst at an independent research firm. Kelso is part
:
of a team of analysts who focus on the automobile industry. Recently, Kelso disagreed
育
with two research sell recommendations written by her team, even though she felt
教
confident the research process was properly conducted. In a webcast open to all
程
institutional but not retail clients, Kelso states, "Even though my name is on the sell
金
reports, these stocks are a buy in part because sales and share prices for both auto
companies will rise significantly because of strong demand for their vehicles." Kelso's
actions would least likely violate which of the following CFA Institute Standards of
55-88
Professional Conduct?2017Mock
A. Communication with Clients.
B. Diligence and Reasonable Basis.
C. Fair Dealing.
Rodney Rodrigues, CFA, is responsible for identifying professionals to manage specific

asset classes for his firm. In selecting external advisers, Rodrigues reviews the adviser's
investment process, established code of ethics, the quality of the published return
information, and the compliance and integrated control framework of the organization.
In completing his review, Rodrigues most likely violated the CFA Institute Standards of
Professional Conduct with regard to his due diligence on: ★2017Mock
A. internal control procedures.
B. adherence to strategy.
C. performance measures.
Barry Cannon is the lead quantitative analyst at a Hedge Fund. He found some intriguing
research that can be used in his model through an internet blog, run by Expert CFA.
Under the pressure of his company, Barry includes these online research factors to his
new model without further research and recommends it to several fund managers. Did
Cannon violate the CFA Institute Code and Standards? case
A. Yes, related to Diligence and Reasonable Basis.

B. Yes, related to Independence and Objectivity.
C. No.
Wouter Duyck, CFA, is the sole proprietor of an investment advisory firm serving several
hundred middle class retail clients. Duyck claims to be different from his competitors
because he conducts research himself. He discloses that to simplify the management of
all these accounts he has created a recommended list of stocks, from which he selects
investments for all of his clients based on their suitability. Duyck’s recommended list of
:
stocks is obtained from his primary broker, who has completed due diligence on each
育
stock. Duyck’s recommended list least likely violates which of the following CFA Institute
教
Standards of Professional Conduct? (Mock 2018)

程
A. Fair Dealing.
金
B. Misrepresentation.
C. Diligence and Reasonable Basis.
56-88
10.18 Communication with Clients and Prospect Clients
10.18.1
10.18.1.1 Key points of communication with clients and prospective clients:

➢ Distinguish between fact and opinion.
◼ “…Will be…”→ fact.
◼ “…May be …”→ opinion.
➢ Informing clients of the investment process.
➢ Keep clients informed on an ongoing basis about changes to the investment
process.
➢ Understanding the basic characteristics of an investment is important in judging
suitability on a stand-alone basis, it’s especially important in determining the
impact each investment will have on the characteristics of a portfolio.
➢ Should inform clients about the specialization or diversification expertise of
external advisers.
10.18.1.2 in person, over the call, or by the computer. If
recommendations are in capsule form (such as a recommended stock list), should

notify clients that additional information and analyses are available upon request.
10.18.1.3
➢ Include limitations of the analysis and conclusions in the report.

➢ Distinction between facts and opinions in reports.
➢ If not indicate that earnings estimates, changes in the dividend outlook, and
future market price information are opinions subject to future circumstances,
thus fail to separate past from future and violate V(B).
➢ In the case of complex quantitative analyses, analysts must clearly separate fact
from statistical conjecture and should identify the known limitations of an
analysis
➢ Changes in style, ceilings, committee, universe of investment should disclose to
:
the clients and prospect clients.

育
教
程
➢ Capacity is the investment amount beyond which returns will be negatively

金
affected by new investments.

➢ Communicate significant risk and limitation of analysis:
◼ Members and candidates

57-88
◼ member candidate
V(B)
◼ Report presentation: member or candidate
10.18.2
Colin Caldwell, CFA, is the chief investment officer of Northwest Mutual Fund, whose
investment objective is to invest in fixed income emerging market securities. Caldwell
allocates the fund’s assets primarily to bonds of commodity producers in emerging
markets and invests in a combination of several different investments to ensure an
:
育
acceptable level of risk. The allocation is clearly disclosed in all fund communications.
High volatility in the commodities markets at the start of the year makes Caldwell
教
pessimistic about returns, so he shifts the fund into emerging market and U.S.
程
government securities, positions he maintains at the end of the year. This change is
金
noted in the next annual report to fund shareholders. Caldwell’s investment change
least likely violated the CFA Institute Code of Ethics and Standards of Professional
Conduct concerning: 2012Mock
58-88
A. Diversification.
B. Communication with clients.
C. Investments outside his mandate.
Which of the following statements concerning requirements under Standard V(B)–

Communication with Clients and Prospective Clients is least likely accurate? This
standard requires members and candidates to: 2017Mock
A. divulge the number of investment related personnel responsible for external communication.
B. distinguish between fact and opinion in the presentation of investment analysis and
recommendations.
C. disclose the basic format and general principles of the investment process.
10.19 Record Retention
10.19.1
10.19.1.1
➢ CFA 7 ;
➢ If applicable law requires 5-year record, 5
10.19.1.2 Records can be maintained either in hard copy or electronic form;

10.19.1.3 Records are property of the firm
➢ Records created in professional activities are the property of the firm. When
leaving the firm, cannot take those records, including originals or copies of
supporting records of his work, to the new employer without the express consent
of the previous employer.
➢ Cannot use historical recommendations or research reports created at the
previous firm because the supporting documentation is unavailable.
➢ For future use, must re-create the supporting records at the new firm through
:
育
public sources, or directly from covered company, and not from memory or
教
sources through previous employer unless with permission.

程
10.19.1.4 The responsibility to maintain records that support investment action generally falls
金
with the firm rather than individuals.

➢ Must archive research notes and other documents, either electronically or in hard
copy, that support their current investment-related communications.
59-88
➢ Doing so will assist their firms in complying with requirements for preservation of
internal or external records.
10.19.1.5 New media record:
10.19.2
Guillermo Sandoval, CFA, owns an asset management firm with offices downtown, To
minimize rent expenses, each year Sandoval ships the previous year’s research records
to a nearby warehouse. There, the reports are digitized and stored in both electronic
and hard-copy forms. After five years, all paper copies are destroyed and only electronic
copies are retained. Are Sandoval’s record-retention procedures in compliance with the
CFA Institute Standards of Practice? 2010Mock
A. Yes.
B. No, because he did not retain the copies in his offices.
C. No, because he failed to retain the original documents.
Martin Blank develops an analytical model while he is employed by Green Partners

Investment Management, LLP (GPIM). While at the firm, he systematically documents
the assumptions that make up the model as well as his reasoning behind the
assumptions. As a result of the success of his model, Blank is hired to be the head of the
research department of one of GPIM’s competitors. Blank takes copies of the records
:
supporting his model to his new firm. Blank least likely violates the CFA Institute
育
Standard of Professional Conduct concerning: case

教
程
A. Record retention.
金
B. Loyalty to employer.
C. Independence and objectivity.
60-88
10.20 Disclosure of Conflicts
10.20.1
10.20.1.1 Must 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 their employer.
10.20.1.2 Ensure that such disclosures are prominent, are delivered in plain language, and
communicate the relevant information effectively.
➢ Best practice is to update disclosures when the nature of a conflict of interest
changes materially.
10.20.1.3 If an analyst was asked to cover the company, when inherit the shares of the
company in subject:
➢ Must disclose if continue to follow.
➢ Best practice: assign another analyst to follow up the company.
10.20.1.4 Restrict personal trading, outside board membership, and related activities to
prevent situations that could give the appearance of a conflict of interest.
10.20.1.5 Disclosure to clients: corporate financing; market making relationship; security
holding; directorship; individual relationship.
10.20.1.6 Also disclose fee arrangements, subadvisory arrangements or situations involving
nonstandard fee structures. Equally important is to disclose arrangements in which
the firm benefits directly from recommendations.
10.20.1.7
➢ Internal conflict between R&D and investment banking.

➢ External conflict with listed firms.
➢ Broker-sponsored limited partnerships to invest venture capital.
10.20.1.8
➢ The easiest method: prohibit from owning any such securities → overly
burdensome and discriminates against members and candidates.
➢ Sell-side members and candidates should disclose ownership in stock
:
育
recommended, buy-side members and candidates should disclose procedures for

reporting requirements for personal transactions.
教
10.20.1.9 Conflicts as a director

程
➢ Duties owed to clients and to shareholders of the company.

金
➢ Investment personnel as a director receive the securities or options.

➢ Board service receiving MNI.
61-88
10.20.1.10Performance arrangement
➢ Firms are encouraged to include information on compensation package in firms’

promotional literature.
➢ If fee is based on capital gains or capital appreciation (performance fee), should
disclose;
➢ If outstanding options exist for incentives, should disclose the amount and
expiration date of these options as a footnote to any research report published.
10.20.1.11Incentive fees should not be in conflict with the interests of clients.
➢ If Yes, should disclose special compensation arrangements to clients;
➢ If the member’s or candidate’s firm does not permit such disclosure, the member
or candidate should document the request and may consider dissociating from
the activity.
10.20.2
Umi Grabbo, CFA, is a highly regarded portfolio manager for Atlantic Advisors, a mid-
sized mutual fund firm investing in domestic securities. She has watched the hedge fund
boom and on numerous occasions suggested her firm creates such a fund. Senior
management has refused to commit resources to hedge funds. Attracted by potential
higher fees associated with hedge funds, Grabbo and several other employees begin
development of their own hedge fund to invest in international securities. Grabbo and
her colleagues are careful to work on the fund development only on their own time.
Because Atlantic management thinks hedge funds are a fad, she does not inform her
supervisor about the hedge fund creation. According to the Standards of Practice
Handbook, Grabbo should most likely address which one of the Codes and Standards
immediately? 2017Mock
A. Disclosure of Conflicts.
B. Additional Compensation Arrangements.
C. Priority of Transactions.
:
育
Heidi Katz is a CFA candidate and an analyst at a pension consulting firm. Her father is a
教
major shareholder and managing director at Saturn Partners, a large hedge fund. When
程
assisting in an alternative manager search for a pension client, Katz plans to recommend
金
Saturn's market-neutral strategy because she believes it meets all of the pension plan's
criteria. Given this situation, the best course of action for Katz is to: 2016Mock
A. disclose the potential conflict to the pension client when discussing this recommendation.
62-88
B. disclose the potential conflict to her employer and follow their guidance regarding disclosure
of her relationship to the client.
C. not present this strategy to the client and recommend another strategy.
Adira Badaw, CFA, who owns a research and consulting company, is an independent
board member of a leading cement manufacturer in a small local market. Because of
Badawi's expertise in the cement industry, a foreign cement manufacturer looking to
enter the local market has hired him to undertake a feasibility study. Under what
circumstances can Badawi most likely undertake the assignment without violating the
CFA Institute Code of Ethics and Standards of Professional Conduct? ★2016Mock
A. He makes full disclosure to both companies.
B. He signs confidentiality agreements with both companies.
C. He receives written permission from the local company.
Ian O'Sullivan, CFA, is the owner and sole employee of two companies, a public relations
firm and a financial research firm. The public relations firm entered into a contract with
Mallory Enterprises to provide public relations services, with O'Sullivan receiving 40,000
shares of Mallory stock in payment for his services. Over the next 10 days, the public
relations firm issued several press releases that discussed Mallory's excellent growth
prospects. O'Sullivan, through his financial research firm, also published a research
report recommending Mallory stock as a "buy." According to the CFA Institute Standards
of Professional Conduct, O'Sullivan is most likely required to disclose his ownership of
Mallory stock in: 2016Mock
A. the press releases only.
B. both the press release and the research report.
C. the research report only.
10.21 Priority of Transaction
10.21.1
:
10.21.1.1 Investing public > client > employer > individual (Beneficial owner)
育
10.21.1.2 Avoiding potential conflicts

教
➢ Conflicts between the client’s interest and an investment professional’s personal

程
interest may occur.

金
➢ Although conflicts of interest exist, it’s OK for individual managers, advisers, or

fund employees making money from personal investments as long as: 1)the client
is not disadvantaged by the trade; 2)the investment professional does not benefit
63-88
personally from trades undertaken for clients; 3)comply with applicable
regulatory requirements.
10.21.1.3 Standards for nonpublic information
➢ Prohibit from conveying nonpublic information to any person whose relationship
to the member or candidate makes him a beneficial owner of the person’s
securities. Must not convey this information to any other person if the nonpublic
information can be deemed material.
10.21.1.4 Family accounts
➢ Family accounts that are client accounts should be treated like any other firm
account, should not be disadvantaged because of that relationship.
➢ Disadvantage parents who are normal fee-paying clients: violate III (B) fair
dealing.
➢ If a member/candidate has a beneficial ownership in the account, however, the
member or candidate may be subject to pre-clearance or reporting requirements
of the employer or applicable law.
10.21.1.5 Recommended procedures for compliance
➢ Limited participation in equity IPOs.
➢ Restrictions on private placements.
➢ Establish blackout/restricted periods.
➢ Best method: 1)disclosure of personal holdings/beneficial ownerships upon
commencement of the employment relationship and at least annually thereafter;
2)Providing duplicate confirmations of transactions; 3)preclearance of
participation in IPOs.
➢ Once trading restrictions are in place, must be enforced..
➢ Disclosures of policies.
10.21.2
Several years ago, Leo Peek, CFA, co-founded an investment club. The club is fully
invested but has not actively traded its account for at least a year and does not plan to
:
resume active trading of the account. Peek's employer requires an annual disclosure of
育
employee stock ownership. Peek discloses all of his personal trading accounts but does
教
not disclose his holdings in the investment club. Peek's actions are least likely to be a
程
violation of which of the CFA Institute Standards of Professional Conduct? 2017Mock

金
A. Misrepresentation.
B. Transaction priority.
C. Conflicts of interest.
64-88
Margie Germainne, CFA, is a risk management consultant who has been asked by a small
investment bank to recommend policies to prevent bank employees from front running
client orders. These clients generally invest in one or more of the bank's large cap equity
unit trusts. To ensure compliance with the CFA Institute Standards of Professional
Conduct, Germainne should least likely recommend which of the following? Employees
should be restricted from trading: ★2016Mock
A. equity-related securities.
B. without prior permission.
C. during established time periods.
Lin Liang, CFA, is an investment manager and an auto industry expert. Last month, Liang
sent securities regulators an anonymous letter outlining various accounting
irregularities at Road Rubber Company. Shortly before he sent the letter to the
regulators, Liang shorted Road stock for his clients. Once the regulators opened an
investigation, which Liang learned about from his sources inside the company, Liang
leaked this information to multiple sources in the media. When news of the
investigation became public, the share price of Road immediately dropped 30%. Liang
then covered the short positions and made $5 per share for his clients. Liang least likely
violated which of the CFA Institute Standards of Professional Conduct? 2014Mock
A. Priority of Transactions.
B. Misconduct.
C. Market Manipulation.
10.22 Referral Fees
10.22.1
10.22.1.1 Content: Members and Candidates must disclose to their employer, clients, and
prospective clients, as appropriate, any compensation, consideration, or benefit
received from, or paid to, others for the recommendation of products or services.
:
育
教
程
10.22.1.2 Disclosure 1) any partiality shown in any

金
recommendation of services; 2)the full cost of the services;

10.22.1.3 Disclose to the clients being referred and employer if necessary; Disclose nature of
consideration.
65-88
10.22.1.4 Encourage employers to develop procedures for referral fees.
10.22.1.5 Firm may completely restrict such fees, if not restrict, should indicate the
appropriate steps for requesting approval.
10.22.1.6 Employers should have investment professionals provide to the clients notification
of approved referral fee programs and provide the employer regular (at least
quarterly) updates on the amount and nature of compensation received.
10.22.2
Referral fee should be updated repeatedly at least:

A. Annually.
B. Semi-annually.
C. Quarterly.
Jackson Barnes, CFA, works for an insurance company providing financial planning
services to clients for a fee. Barnes has developed a network of specialists, including
accountants, lawyers, and brokers who contribute their expertise to the financial
planning process. Each of the specialists is an independent contractor. Each contractor
bills Barnes separately for the work he or she performs, providing a discount based upon
the number of clients Barnes has referred. What steps should Barnes take to be
consistent with the CFA Institute Standards of Professional Conduct? 2013mock
A. Have his independent contractors approved by the insurance company.
B. List the consideration he receives from the specialists on monthly client invoices.
C. Inform potential clients about his arrangement with the contractors before they agree to hire
him.
10.23 Responsibilities as a CFA Institute Member or CFA Candidate; Reference to CFA Institute,
Designation
10.23.1
10.23.1.1 Violations include:

:
育
➢ Cheating on the CFA exam or other CFA Institute’s exams.

教
➢ Not complying with rules and policies of the CFA program.

程
➢ Divulging the confidential information to others.

➢
金
Improperly using the designation.

➢ Misrepresenting information on Professional Conduct Statement of the CFA.
➢ Cheating on the CFA exam, violate VII(A), I(D).
66-88
10.23.1.2 VII(A) Conduct as Members and Candidates)
CFA CFA CFA
10.23.1.3 Over-promise: the competency of an individual over-promise future investment
results as lower risk, higher performance
10.23.1.4 The order of CFA and CPA does not matter.
10.23.1.5 CFA CFA
membership dues CFA
annual conduct report
10.23.1.6 CFA
10.23.1.7 CFA cfas.
10.23.1.8 CFA CFA, Chartered Financial Analyst; cfa, C.F.A,
CFA-typed, China-CFA .
10.23.1.9 CFA mustn't be used as part of the name of the firm.

10.23.1.10Shouldn’t cite the expected date of exam completion and award of charter.
10.23.1.11 CFA
10.23.1.12 CFA
VII (B);
10.23.1.13 CFA VII

:
育
(B)
教
程
10.23.2
金
Tammi Holmberg is enrolled to take the Level I CFA exam. While taking the exam, the
candidate on Holmberg's immediate right took a stretch break and a piece of paper from
his pocket fell onto Holmberg's desk. Holmberg glanced at the paper and realized there
67-88
was information written on the paper, which included a formula Holmberg needed for
the question she was working on. Holmberg had not memorized this formula and could
not complete the question without this information. Holmberg pushed the paper off
her desk and used the formula to complete the question. According to the CFA Institute
Code of Ethics and Standards of Professional Conduct, Holmberg most likely: (1906
A. compromised her exam.

B. was free to act on the information that fell on her desk.
C. is responsible for notifying exam proctors of her neighbor's violation.
Pia Nilsson is a sole proprietor investment adviser. An economic recession has reduced
the number of clients she advises and caused revenues to decline. As a result, Nilsson
has not paid her CFA Institute membership dues for the past two years. When a national
financial publication recently interviewed Nilsson, she indicated that up until two years
ago, she had been a CFA charterholder and a CFA Institute member in good standing. In
addition, she stated the completion of the CFA Program enhanced her portfolio
management skills and enabled her to achieve superior returns on behalf of her clients.
Which of Nilsson's actions most likely violated the CFA Institute Standards of
Professional Conduct? ★ 2017Mock
A. Nonpayment of CFA Institute membership dues.
B. Indicating that being a CFA charterholder has enhanced her portfolio management skills.
C. Attributing her superior returns to participation in the CFA Program.
Vishal Chandarana, an unemployed research analyst, recently registered for the CFA
Level I exam. After two months of intense interviewing, he accepts a job with a stock
brokerage company in a different region of the country. Chandarana posts on a blog
how being a CFA candidate really helped him get a job. He also notes how relieved he
was when his new employer did not ask him about being fired from his former employer.
Which CFA Institute Standards of Professional Conduct did Chandarana least likely
:
育
violate? 2015Mock
教
A. Loyalty to Employers.
程
B. Reference to CFA Institute, the CFA Designation, and the CFA Program.
金
C. Misconduct.
10.24 GIPS
68-88
10.24.1
10.24.1.1 Misleading practices that hinder performance comparability:

➢ Representative accounts-showing a top-performing portfolio as representative of
firm's results.
➢ Survivorship bias-excluding wake performance.
➢ Varing time periods- showing performance for selected time periods with
outstanding returns.
10.24.1.2 Complying with the GIPS standards is voluntary.
10.24.1.3 Any firms that actually manage assets can claim compliance with the standards.
➢ Consultants → can’t claim compliance unless actually manage assets.
➢ Software (and vendor of software) cannot be compliant → can assist firms in
compliance with GIPS.
10.24.1.4 Firm-wide and full compliance
➢ Can’t be achieved on a single product or composite.
➢ Two options: (1) Fully comply with all requirements; (2) Not comply with all
requirements and not claim compliance.
10.24.1.5 Benefit three groups: asset managers, prospective clients and asset owners and
their oversight bodies.
10.24.1.6 composite
➢ A composite is a grouping of individual discretionary portfolios representing a

similar investment strategy, objective, or mandate.
➢ A composite, such as Global Equities, must include all portfolios (current and
past) that the firm has managed in accordance with this particular strategy.
➢ The firm should identify which composite each managed portfolio is to be
included in before the portfolio’s performance is known.
➢ All actual, fee-paying, discretionary portfolio must be included in at least one
composite. Non-fee-paying discretionary portfolio may be included in a
composite. Non-discretionary portfolios must not be included in a firm’s
composites.
:
育
10.24.1.7 Fundamentals of compliance

教
➢ Compliance cannot be achieved on a single product or composite.

程
➢ Two important issues that a firm must consider when becoming compliant with
金
the GIPS standards are:

◼ Definition of the firm is the foundation for firm-wide compliance and creates
defined boundaries whereby total firm assets can be determined.
69-88
◼ Firm’s definition of discretion establishes criteria to judge which portfolios
must be included in a composite and is based on the firm’s ability to
implement its investment strategies.
➢ Firms should adopt the broadest, most meaningful definition of the firm. The
scope of this definition should include all geographical offices operating under the
same brand name, regardless of the actual name of the individual investment
management company.
10.24.1.8 Verification
➢ Verification is the review of an investment management firm’s performance
measurement processes and procedures by an independent third-party “verifier”.
➢ Whether the firm has complied with all the composite construction requirements
of the GIPS standards on a firm-wide basis.
➢ Whether the firm’s processes and procedures are designed to calculate and
present performance results in compliance with the GIPS standards.
➢ A single verification report is issued in respect of the whole firm; verification
cannot be carried out for a single composite.
10.24.2
In cases where applicable local laws governing calculation and presentation of

investment performance conflict with the GIPS standards, firms are: (1912)
A. required to comply with local regulations and make full disclosure of the conflict to claim GIPS
compliance.
B. unable to claim GIPS compliance in cases where local regulations prohibit accurate calculation.
C. required to calculate and maintain two sets of performance data in order to claim GIPS
compliance.
The Global Investment Performance Standards least likely require: 2015Mock

A. nondiscretionary portfolios to be included in composites.
B. non-fee-paying portfolios to be excluded in the returns of appropriate composites.
:
C. composites to be defined according to similar investment objectives and/or strategies.

育
教
Solution: A
程
Composites (Standard IV – Composites) must be defined according to similar investment objectives

金
and/or strategies. Terminated portfolios must be included in the historical returns of appropriate
composites, and only fee-paying portfolios are to be included in composites. Non-discrectionary
portfolios must not be included in a firm's composites.
70-88
Which of the following is least likely a requirement of the GIPS standards? Firms are
required to: (1912)
A. have their performance records verified by an independent third party.
B. include all discretionary, fee-paying portfolios in at least one composite.
C. present a minimum of five years of annual investment performance compliant with GIPS
standards.
:
育
教
程
金
71-88
Solutions
:
育
教
程
金
72-88
:
育
教
程
金
73-88
10. Ethics and Professional Standards
10.1.
Solution: C
Code of ethics serves as a general guide for how community members should act and the Code is
the shared principles and expected behaviors of a profession’s members. Standards of conduct
serve as benchmarks for the minimally acceptable behavior of community members and can help
clarify the code of ethics.
Solution: B
The law is not always the best mechanism to reduce unethical behavior. Ethical conduct goes
beyond what is legally required and encompasses what different societal groups or communities,
including professional associations, consider to be ethically correct behavior.
Solution: C
Unethical behavior erodes and destroys trust. Investors with low levels of trust are less willing to
accept risk and, therefore, will likely demand a higher return for the use of their capital. They may
also choose to invest elsewhere or to not invest at all.
Solution: C
Punishing abuse in the financial markets is not one of the six components of the Code of Ethics.
Solution: A
Members and candidates must self-disclose on the annual Professional Conduct Statement all
matters that question their professional conduct, such as involvement in civil litigation or criminal
investigations or being the subject of a written complaint.
Solution: A
The hearing panel’s task is to determine whether a violation of the Code and Standards occurred
and, if so, what sanction should be imposed.
:
The Professional Conduct staff may conclude the inquiry with no disciplinary sanction, issue a
育
cautionary letter, or continue proceedings to discipline the member or candidate. The CFA institute
教
board of governors maintains oversight and responsibility for the Professional Conduct Program
程
(PCP), which, in conjunction with the Disciplinary Review Committee (DRC), is responsible for
金
enforcement of the Code and Standards.
Solution: A
74-88
All CFA Institute members and candidates enrolled in the CFA Program are required to comply with
the Code and Standards. The CFA Institute Board of Governors maintains oversight and
responsibility for the Professional Conduct Program (PCP).
Solution: A
Under Standard I(A) in situations where a member or candidate is aware of employer engagement
in unethical or illegal activity, it is recommended that they attempt to stop the behavior by bringing
it to the attention of a supervisor or the firm's compliance department.
Solution: B
Buffet sat on the audit committee that determined the bank's provisioning policies that were
contrary to the statutory regulations of the central bank. As a result, he most likely violated
Standard I–Professionalism by not abiding by regulations of a regulatory body. Gatabaki did not
violate Standard I-Professionalism because it is not apparent she knowingly facilitated the incorrect
provisioning policy.
Solution: A
Standard I (A) Knowledge of the Law requires members and candidates to comply with the more
strict law, rules, or regulations and follow the highest requirement, which in this case would be the
CFA Institute Standards of Professional Conduct. Standard II (A) Material Nonpublic Information
would also apply because members and candidates who possess material nonpublic information
that could affect the value of an investment must not act or cause others to act on the information.
Disclosure that she meets local mandatory legal requirements, not the more strict law rule or
regulation of the Code and Standards, would not excuse the member from following the Code and
Standards.
Solution: A
Ducumon should refuse to recommend the shares as her opinion of the Babyskin shares must not
be affected by internal pressure. If Ducumon followed the request from the investment banking
department at her company, she would be in violation of Standard I(B)–Independence and
:
育
Objectivity. Ducumon must refuse to recommend the Babyskin shares until they are an attractive
purchase based on fundamental analysis and market pricing.
教
程
Solution: B
金
Members should use reasonable care and judgment to maintain independence and objectivity, as
stated in Standard I (B). There is no indication of inappropriate behavior in the selection of the
equity manager or in the acceptance of employment with that manager; both decisions were based
75-88
on the excellent performance records of the manager and the member, respectively.
Solution: C
Under Standard I(B), members and candidates must protect their independence and objectivity.
Agreeing to provide objective research coverage of a company does not constitute a violation of
this standard, provided the analyst writing the report is free to come up with his own independent
conclusion. Smith can agree to provide research coverage but cannot commit Granite's research
department to providing a favorable recommendation.
Solution: A
Standard I(B): Independence and Objectivity requires members and candidates to use reasonable
care and judgment to maintain their independence and objectivity in their professional activities.
Best practice dictates that Kumar only accept transportation to the remote mining sites because it
is unlikely he would be able to source commercial flights to the locations and ground transportation
may not be viable. Because Kumar would normally visit mining sites around the world as part of
his job and because he is combining this trip with trips to other mine sites in different countries, it
would be inappropriate for Cerberus to pay for the analyst's travel expenses from London.
Although Kumar could go on safari with the group of analysts, he should pay his own way so as to
restrict any influence such a gift could possibly have when making his investment
recommendations on Cerberus.
Solution: C
The member misrepresented the returns she could realistically achieve for her clients, violating
Standard I(C)–Misrepresentation, which prohibits members and candidates from guaranteeing
clients any specific return on volatile investments.
Solution: A
The research analyst has not violated Standard I(C): Misrepresentation because he has not
knowingly made any misrepresentations related to investment analysis, recommendations,
actions, or other professional activities. The research analyst has correctly attributed the model to
:
育
both the quantitative analyst and to himself because he has revised the original model. Research
developed while employed by a firm is the property of the firm, and the analyst is in violation of
教
Standard V(C): Record Retention because members and candidates must develop and maintain
程
appropriate records to support their investment analysis, recommendations, actions, and other
金
investment-related communications with clients and prospective clients. As a general matter,

records created as part of a member's or candidate's professional activity on behalf of his or her
employer are the property of the firm. The analyst also violated Standard VI(B): Priority of
76-88
Transactions by taking advantage of his knowledge of the stock's value before allowing his
employer to benefit from that information.
Solution: A
A personal bankruptcy does not necessarily constitute a violation of Standard I(C)–
Misrepresentation or Standard I(D)–Misconduct. If the circumstances of the bankruptcy involved
fraudulent or deceitful business conduct, then failing to disclose it may constitute a violation of the
Standards of Professional Conduct.
Solution: A
Members and candidates must not copy (or represent as their own) original ideas/material without
permission. They must acknowledge and identify the source of ideas/material that is not their own.
Using factual information from well-known financial institutions without acknowledgment is
permitted by Standard I(C).
Solution: A
By failing to adhere to the non-compete clause he agreed to abide by when signing his employment
contract, Hasina shows a lack of professional integrity toward his employer. This behavior reflects
poorly on the good reputation of members and is a violation of the Code of Ethics, which states
that members and candidates must act with integrity, and Standard I (D) Misconduct, which states
that members and candidates must not engage in any professional conduct involving dishonesty,
fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity,
or competence. The Code of Ethics at times requires a member or candidate to uphold a higher
standard than that required by law, rule, or regulation, or in this case the strict application of the
employment agreement.
Solution: A
Naib knowingly misrepresented his qualifications at the time of his hire by stating he had obtained
an MBA when in fact he had not. This action reflects adversely on his professional integrity,
violating Standard I(D):Misconduct. Stating he passed his CFA exams in three consecutive years is
:
育
not a violation of Standard VII(B): Reference to CFA Institute, the CFA Designation, and the CFA
Program if it is factual. There is no evidence given to indicate he did not pass as claimed.
教
程
Solution: A
金
The CFA Institute Code of Ethics requires members to act with integrity, competence, diligence,
respect, and in an ethical and professional manner. The Standards of Professional Conduct relating
to professional misconduct state members and candidates must not commit any act reflecting
77-88
adversely on their professional reputation, integrity, or competence. Bennett's actions violated the
Code of Ethics and StandardI(D)–Professionalism, but not Standard II–Integrity of Capital Markets.
Solution: B
Selective disclosure occurs when companies discriminate in making material nonpublic
information public. Corporations that disclose information on a limited basis create the potential
for insider-trading violations. See Standard II(A).
Solution: A
To comply with the Code and Standards, a member or candidate cannot use material nonpublic
information when making investment recommendations. The information overheard would not be
considered material only if any public announcement of the staff removal would be unlikely to
move the share price of the bank, nor would the regional expansion substantially impact the value
of the bank.
Solution: B
A violation of Standard II(A): Material Nonpublic Information is likely to occur when using
information that is selectively disclosed by corporations to a small group of investors, analysts, or
other market participants. Earnings estimates given in a one-on-one meeting would likely be
considered material and nonpublic information. Information made available to analysts remains
nonpublic until it is made available to investors in general. Under the mosaic theory, it is acceptable
to use information from industry contacts as long as the analyst uses appropriate methods to arrive
at her conclusions. Additionally, it is acceptable to use nonmaterial nonpublic information in her
analysis; this use is not a violation of Standard II(A): Material Nonpublic Information.
Solution: C
Ronde should refuse to follow his supervisor's request. If Ronde revises his research report based
on the information he overheard at the industry conference, he would violate Standard
II(A): Material Nonpublic Information. The production delay information is material and considered
nonpublic until it is widely distributed. Therefore, it should not be included in Ronde's research
:
育
report or acted on until it becomes public. Ronde should try to encourage Fulda to make the
information public.
教
程
Solution: A
金
Blake violated Standard II(B) regarding the Integrity of Capital Markets by engaging in a practice
that is likely to artificially inflate trading volume.
78-88
Solution: A
Standard II(B), Market Manipulation precludes transaction-based manipulation such as attempting
to “buy and sell the stock using the accounts in hopes of raising the trading volume and the price.”
Solution: C
Kozniak does not appear to have violated any CFA Institute Standards of Professional Conduct.
Because she is known in the market for investing and brokering property and both parties have
worked with Kozniak in the past, both parties would know of her interests. In addition, in both
cases, she acts for her own account as a primary investor, not as a broker. She buys the property
for her own portfolio and then sells the property from her own portfolio. Therefore, Kozniak did
not violate Standard VI(A)–Disclosure of Conflicts. When she purchased the property for her
portfolio, she saved her client from losing the building to the bank and did not charge a sales
commission. Because the sale of the property to her other client did not take place until six months
after her purchase, and she was unable to contact the client who had earlier expressed interest
prior to her purchase, she cannot be accused of violating Standard III(A)–Loyalty, Prudence, and
Care with either client.
Solution: A
Standard III(A): Loyalty, Prudence, and Care stipulates that the client owns the brokerage.
Therefore, members and candidates are required to use client brokerage only to the benefit of the
clients (soft commissions policy). Because the firm specializes in domestic equities, an offshore
investment database service would not benefit the clients.
Solution: A
Performing a cost–benefit analysis showing that voting all proxies might not benefit the client and
concluding that voting proxies may not be necessary in all instances is not a violation of Standard
III(A): Loyalty, Prudence, and Care. However, even though voting proxies may not be necessary in
all instances, part of a member's or candidate's duty of loyalty under Standard III(A) includes voting
proxies in an informed and responsible manner, which is not being done when Lopez automatically
votes with management on the majority of issues. In addition, members and candidates should
:
育
disclose to clients their proxy-voting policies, including any changes to that policy, as required by
Standard III(A), which has not been done.
教
程
Solution: B
金
According to Standard III(A): Loyalty, Prudence, and Care, members and candidates must place
their clients’ interests before their own interests. The temptation may be to release the changed
recommendation to newsletter recipients simultaneously with or even before the asset
79-88
management clients to try to obtain new clients. But to avoid violating Standard III(A), Huerta must
ensure any change in an investment recommendation is first distributed to her asset management
clients before any newsletter recipients, who are not necessarily clients (that is, they receive the
newsletter for free from a third-party distribution list).
Solution: A
According to Standard III (A) Loyalty, Prudence, and Care, Gupta’s duty of loyalty, prudence, and
care is owed to the participants and beneficiaries (members) of the pension plan. As a church plan,
the restrictions are appropriate given the objectives and constraints of the portfolio.
Solution: B
Clients should be treated fairly and impartially according to Standard III(B). In addition, the flexible
trading terms allow the hedge fund manager to enrich itself and are a violation of Standard II(A),
which concerns trading on material nonpublic information. This situation is also a conflict of
interest, and thus a violation of Standard VI(A)-Disclosure of Conflicts.
Solution: C
The investment officer failed to deal fairly by allocating profitable trades to a favored client at the
expense of others, a violation of Standard III(B): Fair Dealing. The standard requires members and
candidates to treat all clients fairly when taking investment action. Tukwila should have a
systematic approach to allocating trades, such as pro rata, before or at the time of trade execution,
or as soon as possible after trades are executed. The analyst believes the bonds are suitable for
any of her clients, so she has not violated Standard III(C): Suitability
Solution: B
According to Standard III (B) best practices include allocating pro rata on the basis of order size,
not account size. All clients participating in the block trade should receive the same execution
price and be charged the same commission.
Solution: C
:
The analyst violated Standard III(B): Fair Dealing by selectively distributing the revised
育
recommendation only to investment banking clients despite being responsible for making
教
investment recommendations to all group clients. Schleif should distribute the change in
程
recommendation to all clients who received the initial recommendation, not just those within the
金
investment banking division of the group.
Solution: A
80-88
The analyst does not violate any of the Standards of Professional Conduct by having long-standing
client relationships and generally is not required to disclose such relationships. However, the
analyst is not treating all clients fairly as required by Standard III(B)–Fair Dealing when
disseminating investment recommendations; disclosure of the relationship with long-standing
clients is not the issue. The analyst has advantaged some clients over others by providing advance
information, and all clients do not have a fair opportunity to act on the information within the draft
report. Members and candidates may differentiate their services to clients, but different levels of
service must not disadvantage or negatively affect clients.
Solution: A
Updating the IPS should be repeated at least annually and also prior to material changes to any
specific investment recommendations.
Solution: B
The utility is not a suitable investment for a fund that only invests in companies with good
environmental records. Continuing to hold this investment, therefore, was a violation of Standard
III(C)–Suitability.
Solution: B
The client only approved the purchase of one below-investment-grade bond, whereas the portfolio
manager has purchased several additional bonds below investment grade without client approval,
which is in violation of Standard III(C)–Suitability.
Solution: B
Buckner is in violation of Standard III(C) since she did not consider issues
such as the limited liquidity or any potential leverage of this new product when she invested a
substantial percentage of her clients’ portfolios in these instruments.
Solution: A
In Randolf's case, the investment may be appropriate given this client's financial circumstances and
:
育
aggressive investment position. This investment would not be suitable for Kitagawa because of her
need for a steady rate of return and her low-risk profile.
教
程
Solution: B
金
The Standard III (D) Performance Presentation prohibits members/candidates from making any
statements that misrepresent the performance achieved by them or their firms and requires every
reasonable effort to be made to ensure that performance information is fair, accurate, and
81-88
complete. By failing to identify the simulated performance results, Snead violated the standard.
Snead should have disclosed the fact that the returns were generated only in one year of the fund’s
operation and the other performance information is back-tested.
Solution: C.
Clients can be misled if the benchmark’s results are not reported on a basis comparable to that of
the fund’s or client’s results. The best practice is that selecting the most appropriate available
benchmark from a universe of available options.
Solution: C
Taylor’s brochure is in violation of Standard III(D). Taylor should have disclosed that the 25% growth
occurred only in one year.
Additionally, Taylor did not include client accounts other than those in the firm’s common trust
fund. A general claim of firm performance should take into account the performance of all
categories of accounts. Finally, by stating that clients can expect a steady 25% annual compound
growth rate, Taylor is also violating Standard I(C)–Misrepresentation, which prohibits assurances
or guarantees regarding an investment.
Solution: B
Deschutes most likely violated Standard III(E): Preservation of Confidentiality by failing to preserve
the confidentiality of client records when she disclosed specific details about clients in the equity
portfolio.
Solution: B
Miffitt has not violated Standard III (E)–Preservation of Confidentiality, which involves information
about former, current, and prospective clients.
Solution: B
In order to avoid violating Standard III(E)–Preservation of Confidentiality, Staal should determine
whether applicable securities regulations require disclosing the records before she provides the
:
育
confidential information concerning her client's investments.

教
Solution: B
程
Lan's actions do not violate Standard IV (A) – Duties to Employers. Lan does not use company time
金
to make arrangements for his new venture, nor does he misappropriate any information (financial
models or client contacts) from his former employer. All of Lan's actions are permissible under
Standard IV (A).
82-88
Solution: B
Members and candidates are required to disclose any compensation arrangement to their
employers that involves performing tasks or services that their employers can charge for. Disclosure
is required even if the activities occur during non-work hours.
Solution: C
Standard IV(A): Loyalty calls for employees to be loyal to their employer by not causing harm. If
Botha released a contradictory research recommendation report to clients, it could possibly cause
confusion amongst clients and embarrassment to the firm.
Solution: C
Rodriguez is in violation of Standard IV(A): Loyalty, which requires that, in matters related to their
employment, members and candidates must act for the benefit of their employer and not deprive
their employer of the advantage of their skills and abilities, divulge confidential information, or
otherwise cause harm to their employer. Rodriguez should not accept the special treatment from
Hon; instead, he should ask Hon to lower costs for the transactions of his Nisqually clients.
Rodriguez should not average transaction costs because his clients should be given the lower
preferential prices according to Standard III(A): Loyalty, Prudence, and Care.
Solution: A
Members and candidates may have developed profiles on these platforms that include connections
with individuals who are clients of the firm, as well as individuals unrelated to their employer.
Specific accounts and user profiles of members and candidates may be created for solely
professional reasons.
Solution: C
According to Standard IV(B) and Standard VI(A), members should disclose all potential conflicts of
interest, should disclose the substantial time involved in managing family accounts and, when
engaging in independent practice for compensation, should not render services until receiving
:
育
written consent from all parties.

教
Solution: B
程
Golf equipment is a business independent of the financial services industry such that any board
金
obligations would not likely be considered a conflict of interest requiring disclosure according to
Standard IV(B): Additional Compensation Arrangements. Standard IV(B) requires members and
candidates to obtain permission from their employer before accepting compensation or other
83-88
benefits from third parties for the services that might create a conflict with their employer's
interests. Managing investments for family and non-family members could likely create a conflict
of interest for Younis's employer and should be disclosed to his employer.
Solution: B
A supervisor's responsibilities relate to detecting and preventing violations by anyone subject to
their supervision or authority regarding activities they supervise. Ndenda had no way of detecting
and/or preventing Rutabingwa from cheating during the CFA exam, if in fact that is what she did,
because it was an event she did not attend.
Solution: C
Both Musa and Kassim violated the Standards of Professional Conduct. Musa violated Standard
IV(C)–Responsibilities of Supervisors by not ensuring policies were in place to prevent violations of
the Standards of Professional Conduct (in this case, Standard VI(B)–Priority of Transactions) by
someone subject to her supervision. As the head of compliance, Musa supervised Kassim and must
meet her supervisory responsibilities outlined in the Standards of Professional Conduct. Kassim
violated Standard VI(B)–Priority of Transactions because he did not give sufficient priority to
Dunfield's clients before trading on his recommendation.
Solution: B
According to guidance for Standard (IV(C), if a member cannot fulfill supervisory responsibilities
because of the absence of a compliance system or because of an inadequate compliance system,
the member should decline in writing to accept supervisory responsibility until the firm adopts
reasonable procedures to allow the member to adequately exercise such responsibility.
Solution: B
Under Standard IV(C)–Responsibility of Supervisors, a member should exercise reasonable
supervision by establishing and implementing compliance procedures in place prior to the
possibility of any violation occurring, which has not been done in this case.
:
育
Solution: A
The requirement under Standard IV(C): Responsibilities of Supervisors does not include any
教
reference to industry standards. Standard IV(C) requires supervisors to instruct those subordinate
程
to them to whom supervision is delegated about detection methods to prevent violations of laws,
金
rules, regulations, firm policies, and the CFA Institute Code and Standards.
Solution: B
84-88
The recommendation is based on a reasonable and adequate research process, so the analyst could
follow the research team's opinion, as required by Standard V(A)–Diligence and Reasonable Basis.
Solution: B
Standard V(A): Diligence and Reasonable Basis applies to the level of review necessary to select an
external adviser or subadviser and would at minimum include reviewing the adviser's adherence
to its stated strategy.
Solution: A
Cannon has violated Standard V(A)-diligence and reasonable basis by failing to have a reasonable
basis for the new recommendations made to the portfolio managers. Barry should fully test the
factors put into his model and determine the effect on the model before he make recommendation
for it.
Solution: A
A is correct because Standard III(B)–Fair Dealing concerns the fair treatment of clients when
making investment recommendations or taking investment action, but there is no indication that
the advisor has discriminated against any clients with regard to his recommendations as he
invests all clients in the same universe of stocks. The advisor has violated Standard I(C)–
Misrepresentation with his research, which is not independently created and instead relies upon
information provided by his broker. This is contrary to the advisor telling clients he does his own
independent investment research. In addition, the advisor has violated Standard V(A)–Diligence
and Reasonable Basis, as he has not made reasonable and diligent efforts to determine if the
third party’s research is sound.
Solution: A
The investment officer has invested in a combination of several different investments to ensure an
acceptable level of risk rather than having all assets in a single investment, and he has sought a
reasonable amount of diversification. However, the shift into emerging market and U.S.
government securities was communicated to clients in the annual report and not on an ongoing
:
育
basis, in violation of Standard V(B) Communication with Clients and Prospective Clients.
Additionally, the investment officer has not followed the investment style previously
教
communicated to fund investors (i.e., to invest in fixed income emerging market securities),
程
specifically, when he invested in U.S. government securities, a violation of Standard III (C) Suitability.
金
Solution: A
Standard V(B)–Communication with Clients and Prospective Clients does not limit the type or
85-88
number of staff responsible for external communication.
Solution: A .
The Standards do not require on-site storage.
Solution: C
The records created by Blank supporting the research model he developed at GPIM are the records
of GPIM. Taking the documents with him to his new employer without GPIM’s permission violates
Standard V(C)-Record retention and Ⅳ(A)-Loyalty to employer. To use the model in the future,
Blank must re-create the records supporting his model at the new firm.
Solution: A
According to Standard VI(A) Disclosure of Conflicts, Grabbo should disclose to her employer her
hedge fund development because this activity could possibly interfere with her responsibilities at
Atlantic. In setting up a hedge fund, Grabbo was not acting for the benefit of her employer. She
should have informed Atlantic she wanted to organize the hedge fund and come to some mutual
agreement on how this process would occur.
Solution: A
Standard VI(A) requires disclosure of conflicts but does not prohibit members from making
recommendations as long as the potential conflicts are appropriately disclosed.
Solution: A
Making full and fair disclosure of all matters that could reasonably be expected to impair one's
independence and objectivity or interfere with respective duties to one's clients is required by
Standard VI(A)–Disclosure of Conflicts.
Solution: B
Members should disclose all matters that reasonably could be expected to impair the member’s
:
育
objectivity as outlined in StandardⅠ(B), and StandardⅥ(A).

教
程
Solution: B
金
There is no indication that the investment club is trading ahead of clients. See Standard VI(B).
Solution: A
86-88
Although Standard VI(B)–Priority of Transactions is designed to prevent any potential conflict of
interest or the appearance of a conflict of interest with respect to personal transactions, it does
not ban employees from trading securities. A ban on all equity-related securities could be
excessively restrictive to employees and unnecessary if appropriate personal transaction policies
and procedures are in place.
Solution: A
The member has not violated Standard VI(B): Priority of Transactions because this standard
concerns client investment transactions having priority over member or candidate investment
transactions and is not applicable here. The member has engaged in information-based
manipulation of Road stock in violation of Standard II(B): Market Manipulation and Standard I(D):
Misconduct. Members and candidates must refrain from "pumping up" (or down, in this case) the
price of an investment by issuing misleading positive (or negative) information for their or their
clients' benefit.
Solution: C
Employers should have investment professionals provide to the clients notification of approved
referral fee programs at least quarterly.
Solution: C
The referral arrangements should be disclosed to potential clients “before entry into any formal
agreement for services” and not after the fact. This allows potential clients to consider whether
the arrangement causes them any potential harm as a result of the arrangement (e.g., higher fees
and potential conflicts of interests).
Solution: A
Holmberg's conduct compromised the validity of her exam and violated Standard VII (A). Her
conduct was also a violation of the rules and regulations of the CFA Program, the Candidate pledge,
and the CFA Institute Code and Standards.
:
育
Solution: C
It is a violation of Standard VII(B)–Reference to CFA Institute, the CFA Designation, and the CFA
教
Program to claim that the CFA charter helped her to achieve superior returns.
程
金
Solution: B
There is no evidence Chandarana violated Standard VII(B)–Reference to CFA Institute, the CFA
Designation, and the CFA Program with regard to his being a CFA candidate. Specifically,
87-88
Chandarana does not overstate his competency or imply he will achieve superior performance as
a result of his CFA designation. It does appear, however, Chandarana did not act with integrity when
he hid information that could potentially harm his new employer's reputation, thus violating
Standard I(D)–Misconduct and Standard IV(A)–Loyalty.
Solution: A
In cases where applicable local laws governing calculation and presentation of investment
performance conflict with the GIPS standards, firms must comply with local regulations and fully
disclose the conflict in the compliant presentation.
Solution: A
Composites (Standard IV – Composites) must be defined according to similar investment objectives
and/or strategies. Terminated portfolios must be included in the historical returns of appropriate
composites, and only fee-paying portfolios are to be included in composites. Non-discrectionary
portfolios must not be included in a firm's composites.
Solution: A
Firms are encouraged to pursue independent verification from a third party on a firm-wide basis,
verification is not an obligation.
:
育
教
程
金
88-88

CFA一级百题预测 道德

Uploaded by

Copyright:

Available Formats

CFA一级百题预测 道德

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CFA一级百题预测 道德

Uploaded by

Copyright:

Available Formats

What are some of the challenges to ethical conduct according to the passage?

What are some of the challenges to ethical conduct according to the passage?

What are some effects of ethical and unethical behavior mentioned in the passage?

What are some effects of ethical and unethical behavior mentioned in the passage?

10.

Ethical and Professional Standards

➢ Common characteristics of professions to establish trust

◼ Professions normalize practitioner behavior.

◼ Professions provide a service to society.

◼ Professions are client focused.

◼ Professions have high entry standards.

➢ Effects of ethical behavior:

◼ Protection of clients’ interests

◼ More opportunities for investment professionals and their firms

◼ Lead to higher levels of success and profitability

A． The shared principles and expected behaviors of a profession’s members.

B． The general guide for how community members should act.

C． The benchmarks for the minimally acceptable behavior.

The following choices describe the importance of trust except: 讲义改编

Investigation Collecting documents and records

Interview the member/candidates

Issue a Propose a disciplinary sanction

The matter is referred to End

10.2.1.5. The designated officer may decide

➢ That no disciplinary sanctions are appropriate.

➢ To issue a cautionary letter.

To discipline the member or candidate.

10.2.1.7. Sanctions public censure, suspension of membership and use

of the CFA designation, revocation of the CFA charter

From the point of view of an investor, unethical behavior by investment professionals

B. Rise in the demand for investments.

C. Demand for a higher return.

Which of the following is not a component of the CFA Institute Code of

the parties has the responsibility of dealing with this matter? 01

A. The hearing panel.

10.3. Knowledge of the law

➢ (governing their professional activities)

➢ must comply with the more strict law, rule, or regulation;

More strict, less

Less strict More strict strict than Code →

10.3.1.3. Participation or association with violations by others

➢ Inaction combined with continuing association with those involved in illegal or

unethical conduct may be construed as participation or assistance in the illegal or

10.3.1.4. Investment Products and Applicable Laws

10.3.1.5. Recommended Procedures for Compliance

◼ readily accessible current reference copies of applicable statutes, rules,

◼ The formality and complexity of compliance procedures for firms depend on

regulations regarding nonperforming loan provisions on three large loans as a result of

directors of the commercial bank as a non-executive director, representing minority

Linda Chin, CFA, is a member of a political group advocating less governmental

10.4. Independence and Objectivity

➢ Best practice: Reject compromise independence and objectivity

(not unusual arrangement)

➢ Gift from client , I(B).

10.4.1.3. Buy-side clients

calculation and analysis related responsibilities.

➢ Analysts should not be pressured to issue favorable research by the companies

about the firm.

accept modestly arranged travel to participate in appropriate information-

CFA一级百题预测道德

CFA一级百题预测道德

CFA一级百题预测道德