Which of the following statements about a CFA charter holder or candidate is in compliance with the Code and Standards?
Answer (B) is correct. This statement conforms to the Code and Standards, as it is a factual statement to a benefit of earning the CFA designation. The other answers violate reference to CFA Institute, the CFA Designation, and the CFA Program make promises that are tied to the CFA designation or suggest that holding designation implies superior investment performance.
Mary Walters, CFA, is a trust officer at a regional branch of Money Center bank. She has entered into a referral agreement whereby she will refer clients to Bob Sear, a tax attorney who she believes is the best in the business. Sear has told Walters that he will do the tax work on her children’s trust, created by their grandparents, in return for such referrals. According to the CFA Institute Code and Standards, Walters should disclose the arrangement to:
Answer (C) is correct. Standard VI(C) Referral Fees requires that members and candidates should referral arrangement in which the member or candidate receives some form from the referral. Such disclosure will allow the clients and employer to impartiality that the referral arrangement may cause.
Ronaldo Jenkins, CFA, is chief investment officer of Wind watch Advisors, a discretionary investment advisory firm. With over 15 years’ experience in various asset classes, Jenkins is head of Windwatch’s proxy voting committee. He serves on the boards of several nonprofit organizations and public companies and advises local municipal governments. During a recent search for an investment bank for a fixed income offering on behalf of a municipality, Jenkins learns in confidence that an investment bank, which is a large subsidiary of a publicly traded commercial bank owned by Windwatch clients, is experiencing financial difficulties and will be shut down. According to the CFA Institute Standards of Professional Conduct, Jenkins is least likely permitted to:
Answer (C) is correct. The information received by Jenkins is covered by Standard 11(A) Material Information, under which members who possess material nonpublic information to the value of a security are prohibited from trading, or causing others that security. Jenkins received material nonpublic information about the closure of the investment bank which was a large subsidiary of the parent purposes of compliance with Standard 11(A), Jenkins may attempt to achieve dissemination of the information, and in the event that this is not possible, compliance officer of the information. However, under no circumstances share material nonpublic information with other investment personnel purposes or otherwise. Sharing such information may cause others to trade information in violation of Standard 11(A).
While visiting Cassori Company, Mark Ramsey, CFA, overhears management make comments that are not public information not really meaningful by themselves. Combining this information his own analysis and other outside sources, Ramsey decides his recommendation on Cassori from “Buy” to “Sell.” According CFA Institute Standards of Professional Conduct, Ramsey:
Answer (B) is correct. According to Standard 11(A) Material Nonpublic Information, the use of security analysis combined with nonmaterial nonpublic information to arrive at significant conclusions is allowable under the mosaic theory.
Compliance with the Global Investment Performance Standards likely requires firms to:
Answer (A) is correct. All fee-paying discretionary accounts must be included in composites, but including non-fee-paying accounts is not required. The other statements are requirements for compliance. (Study Session 1, LOS 4.a)