i was 11/11 on a long ethics quiz til this one

A CFA Institute member makes a recommendation of a stock in which his firm has a material ownership. He does not know of the material ownership at the time of the recommendation. A day later, he learns of the material ownership and immediately sends out an addendum informing clients of that fact. With respect to Standard VI(A), Disclosure of Conflicts, and Standard V(A), Diligence and Reasonable Basis, this is: A) a violation of Standard VI(A), only. B) a violation of both Standards. C) a violation of Standard V(A), only. D) not a violation of either Standard

B? (I think I might remember this one)


c ??

I want to say C…hmmm that’s a tough one…

wow we are all over the place, D anyone?

D, it’s ok because he didn’t know about it or intentionally left it out.

I say E

Do we suppose he did enough research on the stock or do we suppose he didn’t? I thought we weren’t suppose to suppose anything.

let’s say he did enough research

definitely a. or d.

I’m going with A. Whether he knew about it or not he did not disclose the conflict, so it’s a violation. You don’t get off free because of ignorance I don’t think it is a violation of reasonable basis without further information.

think C. but not sure… should have known about the material ownership if he did the minimal due diligience… however i’m not sure if that means he also broke the disclosure of conflicts standard…

Good question, when analyzing the company, would you expect him to know that his firm held shares in it, would he be able to find out, would it make a difference in the recommendation he makes, i.e. is it necessary for a diligent and reasonable analysis? Those were the questions I asked myself. Also, he immediately informed everyone after learning the fact.

Your answer: A was incorrect. The correct answer was B) a violation of both Standards. The member apparently had not exercised due diligence in making the recommendation if he does not know of the material ownership by his own firm. Even if the member did not know of the material ownership, Standard VI(A) was violated with the release of the recommendation. See this to me is just mean to say he was an awful rulebreaker 2 ways if his actual research was ok, but yeah, that answer does make perfect sense. dude is a bad mo fo rulebreaker and it feels so good. i am delerious tonight and currently 20/21 on this ethics quiz. something i read this weekend must be paying off. woohoo!

uno mas (got it right but i didn’t love any of the answers all that much)- Erica Barnes, CFA, is a trustee for a pension fund. Which of the following is an example of Barnes’ failure to follow general fiduciary standards set forth in the new Prudent Investor Rule? She recommends the fund should: A) consider the need for future growth while maintaining current income obligations. B) hire an outside manager when they lack the in-house expertise to manage a small cap portfolio. C) study the risk/return profile of each new investment opportunity as it relates to the securities already in the portfolio. D) hire her relative to manage a new high yield portfolio.

I am going for A. He has to know that. Too late for that one. Got half correct. C for question 2. Changed my answer. Lol.

Alright, guess there is zero tolerance. Will try to remember this one…thx for sharing.


D? you’re right. i don’t like any of the answers, but i got to think a little nepotism is always bad.