Q2 asks “Which marketing statement should Bukenya most likely revise to conform to the CFA Institute Standards of Professional Conduct?”
Statement #1: Jacaranda looks for investments offering intrinsic value through a top-down approach , including a review of forecasts of economic and industry performance. We evaluate historical and projected company financials, perform extensive financial ratio analysis, conduct management interviews, and determine target prices using a variety of valuation models.
Statement #2: Jacaranda may, at times, hire outside advisers to manage real estate holdings on behalf of clients. These advisers have the necessary expertise to manage property assets.
Statement #3: Jacaranda has four CFA charterholders among its senior management. Their participation in the CFA Program has enhanced their investment management skills. All of these managers passed the three exams in the shortest time possible.
Answer is Statement #2, because not enough info is given regarding outside advisers. While I understand the logic behind this, my thought was that Statement #1 is wrong because it states that they look for intrinsic value through a top-down approach , but then go on describing a bottom-up approach.
Is my reasoning completely wrong? I would’ve thought this violates Communication with Clients and Prospective Clients?
Frankly it doesn’t matter what your reasoning is, I would argue most of ethics is not ‘reasonable’. You just need to figure out the ‘CFAI’ way of thinking, and not over think things (too much).
My issue is that I don’t even believe I was overthinking the above. Once I read the first statement I was like, wait a second, they are not properly describing their investment approach which wouldn’t properly reflect the risk limitations of this approach…
Oh well, hopefully we won’t have similar things in a couple of days…
The statement starts with a forecast of economic performance so that would signal a top-down approach. But I agree it’s a bit ambiguous. I think also that the fact this is an Ethics case and not an Econ case means the focus isn’t on identifying whether it’s top-down or bottom-up.
so yea, the second question of the item set, how is the answer not to amend statement 3??!??!
it literally states Their participation in the CFA Program has enhanced their investment management skills. theyre implying that CFA program makes them better IMers, how is that OK?!?!?!?
This statement seems harmless as if someone is saying I went to college so my knowledge increased/was enhanced. If they had said something along the lines of we can offer superior performance, or our investment management skills are better than XYZ because of the CFA program, then I would say this is a violation.
Hopefully we won’t have ambiguous statements like these since I’m sure I would still pick #1 over #2. If #1 was describing the top-down approach, I would have automatically picked #2. But because #1 seems to have more ambiguity as it clearly shows a discrepancy in the stated investment research style and its description, I would always pick it… oh well
Yeah from what I’ve read these topic tests are usually exam questions that didn’t make it. Just take a look at the new FI topic test they added last week, the very first question has an incorrect solution with wrong numbers etc. Really frustrating, wish CFAI would have better ‘quality control’ on these questions given the money we’re paying them.
it’s ok to say that you’re a better manager due to CFA program but it’s not ok to say that you’re better than someone else due to CFA program, although by logic both statements are pretty much the same (if you’re becoming a better manager, you move up in rankings or quartile of managers’ universe and so you’re obviously better than someone else due to CFA program)