1、 2015 Level I Mock Exam PM Questions and Answers Page 1 1.Carolina Ochoa,CFA,is the chief financial officer at Pantagonia Computing.Ochoa is currently the subject of an inquiry by Pantagonias corporate investigations department.The inquiry is the result of an anonymous complaint accusing Ochoa of fa
2、lsifying 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:A.to CFA Institute when the investigation concludes.B.on her Professional C
3、onduct Statement.C.to CFA Institute if the allegations are proven correct.Answer=B 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 t
4、he subject of a written complaint.CFA Level I Code of Ethics and Standards of Professional Conduct 2.Ileana Inkster,CFA,was recently offered a senior management position within the trust department at a regional bank.The department is new,but the bank has plans to expand it significantly over the ne
5、xt few months.Inkster has been told she will be expected to help grow the client base of the trust department.She is informed that the trust department plans to conduct educational seminars and pursue the attendees as new clients.Inkster notices that recent seminar advertisements prepared by the ban
6、ks marketing department do not mention investment products will be for sale at the seminar.The ads indicate attendees can learn how to immediately add$100,000 to their net worth.What should Inkster most likely do to avoid violating any CFA Institute Standards of Professional Conduct?A.Decline to acc
7、ept the new position B.Accept the position and inform senior management of inadequate compliance procedures C.Accept the position and revise the marketing material Answer=A The prospective supervisors first step should be to not take the position.Accepting the position with inadequate procedures in
8、place or improper marketing material would leave Inkster at risk of incurring a violation of Standard IV(C)Responsibilities of Supervisors.She could agree to be hired as an interim consultant with the bank in order to implement adequate procedures before taking on any supervisory role.CFA Level I Gu
9、idance for Standards IVII Standard IV(C)Responsibilities of Supervisors 2015 Level I Mock Exam PM Questions and Answers Page 2 3.Beth Kozniak,a CFA candidate,is an independent licensed real estate broker and a well-known property investor.She is currently brokering the sale of a commercial property
10、on behalf of a client in financial distress.If the clients building is not sold within 30 days,he will lose the building to the bank.A year earlier,another client of Kozniaks had expressed interest in purchasing this same property.However,she is unable to contact this client,and she has not discover
11、ed any other potential buyers.Given her distressed clients 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 vio
12、lated the CFA Institute Standards of Professional Conduct?A.No B.Yes,she did not disclose her potential conflicts of interest to either client C.Yes,she profited on the real estate to the detriment of her financially stressed client Answer=A Kozniak does not appear to have violated any CFA Institute
13、 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 b
14、uys 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 com
15、mission.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 eithe
16、r client.CFA Level I Guidance for Standards IVII Standard III(A)Loyalty,Prudence,and Care,Standard VI(A)Disclosure of Conflicts 4.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 compan
17、y 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:A.only Kassim.
18、B.both Musa and Kassim.C.only Musa.Answer=B 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
19、)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
20、priority to Dunfields clients before trading on his recommendation.CFA Level I Guidance for Standards IVII Standard IV(C)Responsibilities of Supervisors,Standard VI(B)Priority of Transactions 2015 Level I Mock Exam PM Questions and Answers Page 3 5.Which of the following statements does not accurate
21、ly represent the objectives of Global Investment Performance Standards(GIPS)?The GIPS standards:A.ensure consistent,accurate investment performance data in the areas of reporting,records,marketing,and presentations.B.obtain global acceptance of calculation and presentation standards in a fair,compar
22、able format with full disclosure.C.promote fair competition among investment management firms in all markets by requiring common fee structures.Answer=C One of the objectives of the GIPS standards is to promote fair competition among investment management firms in all markets;this objective does not
23、 require unnecessary entry barriers or hurdles for new firms,such as common fee structures.CFA Level I“The GIPS Standards,”CFA Institute Fundamentals of Compliance 6.James Simone,CFA,the chief financial officer of a publicly listed company,seeks to improve the quality of his companys communication w
24、ith institutional fund managers.He holds an investor briefing with this group the evening before the company earnings are announced.The companys quarterly earnings are broadcast in a press release the next day before the market opens.The earnings information in the investor briefing is identical to
25、that in the press release.Did Simone most likely violate the CFA Institute Standards of Professional Conduct?A.Yes B.No,because the company releases information while the market is closed C.No,because investor briefing and press release information are identical Answer=A Simone violated Standard II(
26、A)Material Nonpublic Information by giving institutional fund managers access to material nonpublic information prior to public dissemination(i.e.,the press release).By releasing earnings results to a select group of institutional fund managers prior to a public press release,Simone allows the insti
27、tutional fund managers a time advantage over other investors not invited to the investor briefing.CFA Level I Guidance for Standards IVII Standard II(A)Material Nonpublic Information 2015 Level I Mock Exam PM Questions and Answers Page 4 7.Diana Fairbanks,CFA,is married to an auditor who is employed
28、 at a large accounting firm.When her husband mentions that a computer firm he audits will receive a qualified opinion,she thinks nothing of it.Later that week,when she reviews a new client account,she notices there are substantial holdings of this computer firm.When she does a thorough internet sear
29、ch for news on the company,she does not find anything about its most recent audit or any other adverse information.Which of the following actions concerning the computer stock should Fairbanks most likely take to avoid violating the CFA Institute Standards of Professional Conduct?A.Complete a thorou
30、gh and diligent analysis of the company and then sell the stock.B.Sell the stock immediately because she has a reasonable basis for taking this investment action.C.Take no investment action.Answer=C The information concerning the qualified opinion is material.It is also nonpublic because it has not
31、been released and is not available online,so the mosaic theory would not hold up in this case.As a result,she would be in violation of Standard II(A)Material Nonpublic Information if she took investment action based on this information.She should also make reasonable efforts to achieve public dissem
32、ination of the information.CFA Level I Guidance for Standards IVII Standard II(A)Material Nonpublic Information 8.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
33、clients generally invest in one or more of the banks 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:A.equity-related securities.B.wit
34、hout prior permission.C.during established time periods.Answer=A 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 securiti
35、es.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.CFA Level I Guidance for Standards IVII Standard VI(B)Priority of Transactions 2015 Level I Mock Exam PM Questions and Answ
36、ers Page 5 9.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 funds best-performing investments,a wind power company.The wind power companys shareholders received utility company s
37、hares 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
38、 dividends are paid for the year then sells the shares.Burnett most likely violated the CFA Institute Standard of Professional Conduct concerning:A.Disclosure of Conflicts.B.Suitability.C.Independence and Objectivity.Answer=B The utility is not a suitable investment for a fund that only invests in c
39、ompanies with good environmental records.Continuing to hold this investment,therefore,was a violation of Standard III(C)Suitability.CFA Level I Guidance for Standards IVII Standard I(B)Independence and Objectivity,Standard III(C)Suitability,Standard VI(A)Disclosure of Conflicts 10.Johannes Meir,CFA,
40、is a compliance officer for Family Estate Planning,LLC,a private wealth consulting firm.Many of his colleagues have family members who have started their own retail businesses.Some of Meirs colleagues have been asked by relatives to serve as non-executive directors or advisers to their companies.Mei
41、r should most likely recommend which of the following policies to ensure compliance with the CFA Institute Standards of Professional Conduct?A.Require employees to declare all income sources annually B.Require employees to declare all outside business interests C.Prohibit employees from becoming dir
42、ectors or advisers Answer=B Standard VI(A)Disclosure of Conflicts requires the disclosure of conflicts.For Meir to understand what potential conflicts of interest employees may have with the firm and with their clients,he would need to know the outside interests of each staff member.The staff member
43、s themselves may not know enough about the company and its clients to disclose those interests that would present a potential conflict.Therefore,it may be best to have all employees declare their outside business interests on an annual basis so Meir can make the determination as to what outside busi
44、ness interests need to be disclosed to clients.CFA Level I Guidance for Standards IVII Standard VI(A)Disclosure of Conflicts 11.Which of the following statements concerning requirements under Standard V(B)Communication with Clients and Prospective Clients is least likely accurate?This standard requi
45、res members and candidates to:A.divulge the number of investment related personnel responsible for external communication.2015 Level I Mock Exam PM Questions and Answers Page 6 B.distinguish between fact and opinion in the presentation of investment analysis and recommendations.C.disclose the basic
46、format and general principles of the investment process.Answer=A Standard V(B)Communication with Clients and Prospective Clients does not limit the type or number of staff responsible for external communication.CFA Level I“Standards of Professional Conduct,”CFA Institute Standard V(B)Communication w
47、ith Clients and Prospective Clients 12.Gabrielle Gabbe,CFA has been accused of professional misconduct by one of her competitors.The allegations concern Gabbes 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 disc
48、losing the bankruptcy filing to her clients,did Gabbe most likely violate any CFA Institute Standards of Professional Conduct?A.No B.Yes,related to Misconduct C.Yes,related to Misrepresentation Answer=A A personal bankruptcy does not necessarily constitute a violation of Standard I(C)Misrepresentati
49、on 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.CFA Level I Guidance for Standards IVII Standard I(C)Misrepresentation,Standard I(D)M
50、isconduct 13.Chan Liu,CFA,is the new research manager at the Pacific MicroCap Fund.Liu observed the following activities after she published a research report on a thinly traded micro-cap stock that included a buy recommendation:Pacific traders purchased the stock for Pacifics proprietary account an