Edit: This is from a larger vignette, but I posted only the relevant information. Joni Black, CFA, works for a portfolio management firm. Black is a partner of the firm and is primarily responsible for managing several large pension plans. She also is in a supervisory position with several research analysts reporting directly to her. Dave Wood is a research analyst who has worked under Black for the last six years. Wood recently completed the Level III CFA exam and is anxiously awaiting the results. As a display of confidence, Black shows Wood a box of business cards that have already been printed up for Wood with the initials “CFA” after his name. She locks them away in a file cabinet and promises to deliver them on the day they get the news of his passing the exam. Despite his close relationship with Black, Wood has been preparing to start his own money management firm. He has turned a spare bedroom in his house into an office with new furniture and computer. He has the room wired with the latest Internet service upgrades. He has subscribed to financial news services and opened a trading account in the name of his proposed company. He has told an old friend about his plans. His friend has a large portfolio being managed at another brokerage firm. The friend had met Black, and told Wood that he did not like her and could not let them handle his portfolio despite their friendship. If Wood was on his own, however, the friend had told Wood that he would want Wood to manage his portfolio. Wood also contacts a cousin, who recently inherited a large portfolio. The cousin says that he would like to get some help managing the portfolio as soon as possible. Wood instructs the cousin to use futures contracts to, in effect, hedge the value of the portfolio cost-free until Wood sets up his business, and Wood can then take his cousin on as a client. He sends each of them a copy of his resume where in his credentials he places after his name “CFA (expected 200X).” Violations with respect to the use of the CFA designation occurred with: A) the letters sent by Wood to his friend and cousin but not with the printing of the business cards by Black. B) both the printing of the business cards by Black and the letters sent by Wood to his friend and cousin. C) the printing of the business cards by Black but not the letters sent by Wood to his friend and cousin. --------------------------------------------------------------------------------
And this: An analyst, who is a CFA Institute member, manages a high-grade bond mutual fund. This is his only professional responsibility. When the analyst comes across a speculative stock investment that he feels is a good investment for his personal portfolio, the analyst: A) may invest in the stock because the analyst would not purchase the stock for the bond portfolio he manages. B) is in violation of Standard IV(A), Loyalty to Employer, by spending time analyzing stocks when he should only analyze bonds. C) must notify his supervisor about the stock according to Standard VI(B), Priority of Transactions, to see if it is appropriate for the portfolio that he manages.
B and i guess C (but i’m thinking second question is just terrible wording… i’m thinking the issue is other funds that the firm manages, but that doesn’t seem to be a choice. C is close but talks about his fund)
B C
A B
A - I am going to say it is not a violation to print things only to use them. A - I am going to say, no priority of trans since it is HY, and no violation of Loyalty since it doesn’t say anything about researching stocks at the expense of HY bonds, so A go for it. God these are a headache.
i’m going with A and B.
C A
Wow. All over the board here… I am finishing up a q-bank test. I will post the answers shortly.
A C?
A C
Edit: Correct answers are A,A. Discussion below with my questions too. Violations with respect to the use of the CFA designation occurred with: A) the letters sent by Wood to his friend and cousin but not with the printing of the business cards by Black. B) both the printing of the business cards by Black and the letters sent by Wood to his friend and cousin. C) the printing of the business cards by Black but not the letters sent by Wood to his friend and cousin. Your answer: B was incorrect. The correct answer was A) the letters sent by Wood to his friend and cousin but not with the printing of the business cards by Black. Standard VII(B), Reference to CFA Institute, the CFA Designation, and the CFA Program, limits the use of the CFA designation to those who have passed all three levels of the CFA Program, have received their charters, and are charter holders in good standing. Wood may not put “CFA (expected 200X)” following his name because it is a violation of the Standard. However, he may state that he is a Level III candidate in the CFA program if he wishes. The printing of the business cards was not a prudent move, but since they are taking care not to distribute them until the appropriate time, no violation has occurred. In some sense, it is like a research report written in advance of an anticipated event. As long as the report is not released until after the event, no violation has occurred. (Study Session 1, LOS 2.a) -------------------------------------------------------------------------------- Here is where I screwed up. When I first read this questions it says that the idiot who already printed them was going to give them to the other idiot the day he passes the exam. I thought, WAIT, that idiot can’t use them yet, he has been approved for work experience and all the other crap. With that in my head I didn’t even really read the questions that only pertains to printing them. ********************************************************* An analyst, who is a CFA Institute member, manages a high-grade bond mutual fund. This is his only professional responsibility. When the analyst comes across a speculative stock investment that he feels is a good investment for his personal portfolio, the analyst: A) may invest in the stock because the analyst would not purchase the stock for the bond portfolio he manages. B) is in violation of Standard IV(A), Loyalty to Employer, by spending time analyzing stocks when he should only analyze bonds. C) must notify his supervisor about the stock according to Standard VI(B), Priority of Transactions, to see if it is appropriate for the portfolio that he manages. Your answer: C was incorrect. The correct answer was A) may invest in the stock because the analyst would not purchase the stock for the bond portfolio he manages. The problem says the analyst “came across” the speculative stock investment. We do not know if the analyst neglected his duties. Since such an investment is clearly not appropriate for a high-grade bond fund, the analyst may invest in the stock without any restrictions relating to the fund. ******************************************************** This one I still don’t reallly get. Even if he doesn’t work with stock clients couldn’t he disadvantage other firm clients by buying a stock that could be on a restricted list? Am I supposed to assume he works alone because I am given no other information? slouiscar, since you are the only supernerd to get these (of course), I want some answers
A - He didn’t use the cards. That’s like saying I can’t write McLeod81, CFA in my notebook for my own amusement. A - He “came across” the stock, so he probably didn’t spend much time looking for it. It’s not suitable for his clients, so he has no restrictions from purchasing it.
…beat me to it.
McLeod or slouiscar can you explain the second one to me in more detail? I understand the first and just made a stupid mistake.
McLeod81 Wrote: ------------------------------------------------------- > …beat me to it. I know you didn’t cheat…
mwvt9 Wrote: ------------------------------------------------------- > McLeod or slouiscar can you explain the second one > to me in more detail? I understand the first and > just made a stupid mistake. If he were a manager of an equity portfolio than this would be a problem, but since he manages a bond portfolio he would not be recommending a stock for any of his clients, therefore he is able to purchase the security
#2 could be a kind of grey area. If he had spent company time (which should be devoted to managing client portfolios) researching the stock, it would have been a violation. If he had instead bought a HY bond of that speculative company, it also would have been a violation. His only responsibility is to manage the high yield bond portfolio. For all we know, the firm might only have fixed income portfolios. Either way, it wouldn’t be his responsibility to check with the firms equity managers to make sure that nobody else wants in on the stock before buying it.
So when we say “he can’t disadvantage his clients” we are only talking about HIS clients, not the total firm? Edit: no longer talking about this specific questions (just in general). What about recommended procedures for pre-clearance of trades and all of that crap? Is that only for material non-public information?
I think pre-clearance is a recommended “best practice” policy, but isn’t required by the standards. He wouldn’t be able to buy the stock if it was on a restricted list. I’m not sure exactly where they draw the line.