Sir S2000magician could you help!!!

  1. Could you explain what is proxy-voting and why it is part of fiduciary duty? If a fund manager refuse to vote proxy, why is it a violation of CFA code and standard? Why is proxy-voting costly at times and can be avoided without violating code and standards in certain circumstances?

  2. When the question say Cash Flow is increasing it means CFO absolute value increasse and CFI absolute value decreases?

It’ will be great if someone can explain the proxy voting thing in plain language… thanks.

Sir S2000magician? I’ve been beknighted? Whoa!

A proxy (in general) is an agent who acts on someone else’s behalf. In corporate matters, a proxy is an agent who votes for a shareholder.

The manager of a mutual fund, for example, has the right to vote the shares owned by the fund. Because the fund has investors, the manager has a duty to vote in a manner that benefits those investors (as opposed, for example, to voting in a manner that benefits himself). Failure to vote the shares denies the investors their right to have a say in the management of the corporation, so the manager has a fiduciary duty to vote the shares in the best interest of the investors.

However, there may be situations where considerable research is needed to determine the vote that is in the investors’ best interest. If the maximum benefit to the investors is small – less than the cost of the research – then it is imprudent to do the research. Because it is always a violation of fiduciary to cast an uninformed vote (even if it turns out to be the right vote for the investors), in the case where the research is too costly, the prudent action is to refuse to do the research, and to refuse to vote.

If cash flow is increasing, then cash flow is increasing: CFO + CFF + CFI this year is larger than CFO + CFF + CFI last year. You cannot say for certain which components increase and which decrease.

Magician (or Sir Magician if you may)

Do you have any tips on passing Ethics? Ethics has been one of my poorer subjects but I was improving in regards to the Schweser Q bvank Ethics question, started out around 65% and then scoring closer to 80% more recently. Then I took the Schweser live mock and even though I scored decently overall (70%), I did worse on Ethics than I have ever done - 0/6 in the AM and 3/6 in the PM. In other subjects I make a mistake on a subject and am able to do better the next time, in Ethics the knowledge does not seem to carry forward.

Do you think it would make sense to memorize whole sections of the Soft Dollar or ROS standards? Do you know of any other teaching tools for Ethics that are out there? Know my stuff overall fairly well and fear that Ethics will put me under.

Wow, this is good! Thanks so much! Go to Toronto and I buy you a beer Sir Magician!

From my experience, the one that appears to be wrong the most has high probability to be correct, so use your first instinct and if you immediately cross out an answer for obviouly wrong, that answer may actually be the right one. I used this technique and consistently get above 60%. I think the way they set the question is use reverse psychology, they will make the wrong choice to appear very right and the right to appear very wrong. So the first 3 seconds when you look at the answer will give you a clue on which is actually right or wrong, do a reverse thinking to counter the exam setter.

For question 2, I should revise as:Higher CFO means higher absolute value of CFO and higher CFI mean lower absolute value of CFI, is that correct?