Ethics

CFA Level I
#1
  1. A CFA Institute member conscientiously maintains records of changes in security regulations. The member notices that his colleagues do NOT, and does NOT say anything. Is this a violation of Standard I(A)? A) Yes, and the member should disassociate from these colleagues. B) Yes, because the member is bound by the Code of Ethics. C) No, as long as the colleagues do not violate the new rules. 2) Lisa Pierce, CFA, has been researching Lander Manufacturing for the past three weeks. She likes the company’s history of fulfilling its contracts on time and within budget. She learns from the uncle of a maintenance worker at Lander’s headquarters that a group of well-dressed individuals arrived at headquarters in a lime green-colored limousine. Pierce knows from publicly available information that Gilbert Controls needs a large supply of specialized motors in its domestic division. She also knows that the executive officers of Gilbert usually travel in a lime green limousine. Pierce concludes that it is very likely that Gilbert will offer a large contract to Lander. Based on this development and her prior research Pierce would like to acquire Lander Manufacturing shares for her client accounts. Pierce should: A) not acquire the shares because she possesses material nonpublic information. B) not acquire the shares until after she has contacted Lander’s management and encouraged them to publicly announce information about the Gilbert Controls contract. She should also wait until Lander has made the announcement and the public has had time to react to it and then make the acquisition. C) proceed to acquire the shares.
#2

C B

#3
  1. C (A CFAI question would refer to the Standard by name, I think) 2. C Mosiac theory - two pieces of immaterial non-public information
#4

C C

#5

C C - Interestingly, I seem to remember reading a similar question that would claim this purchase lacks reasonable basis and due diligence. I still agree that mosaic theory applies.

#6

I go with (1) C (2) C

#7

Correct Answers: B Harris violated Standard III(B), Fair Dealing by not treating all customers fairly. Instead, he disclosed the information selectively to some of his firm’s portfolio managers. White did not violate Standard III(B) because she communicated to the person placing a buy order on Midwest that the order was contrary to the current recommendation before executing the order. --------------------------- C Standard II(A) prohibits members from taking investment action if they possess material nonpublic information. Pierce combined information that was not misappropriated, with her knowledge of the company, to reach a conclusion under the mosaic theory, which is permissible under the standards. She can proceed to buy the shares.

#8

@Damil4real You posted the wrong answer for question #1. BTW, you’re awesome for putting these short questions up. These are great for my increasing ADD since they only take a few minutes.

#9

?? no 1??

#10

I also had C, C…i’ve seen #1 about 3 times before, and I think i’ve gotten it wrong every time…I am now printing it out :slight_smile:

#11

I spend just as much time on Damil-Bank as on Q-Bank.

#12

Damil-bank…ha, awesome.

#13

It’s been a wacky 10-hour CFA exam preparation extravaganza-type day!!!

#14

I’m with you NByz, been going since 8am, just finished right now…about 2 hours of breaks…I am ready to kill this thing…like now…right now.

#15

I too like Damil bank…

#16

Oldie but goodie… so far no one has posed the correct answer to the first question.

#17

i thought b and c as well.

#18

I think it is : 1) B- Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession. 2)B

#19

Yup! The correct answer is B for the first question! I’m surprised no one got it right last year…

#20

whats the answer for the 2nd question