CFA Institute CFA Institute Certifications CFA-LEVEL-1 Questions & Answers

• Question 3851:

  Social factors

  A. none of these answers.

  B. must be a primary consideration of investments because of the ERISA rule.

  C. may never be a primary consideration of investments.

  D. may be a primary consideration of investments, depending on the guidelines of the investment policy.

  E. must be a primary consideration of investments because of the prudence rule.

  F. must be a primary consideration of investments because of the loyalty rule.

  Correct Answer: C

  ERISA guidelines issued by the U.S. Department of Labor state that ERISA prudence standard requires a fiduciary to make investment decisions first on grounds of economic and investment merit. Consideration of social factors may be an incidental, but never primary, consideration of investments that are equal in economic and financial terms.

• Question 3852:

  Which of the following can be found in Standard II?

  A. Members shall not participate in plagiarism.

  B. Members shall maintain appropriate records to support the reasonableness of recommendations.

  C. Members shall maintain knowledge of and comply with all applicable laws.

  D. Members shall not undertake any independent practice in competition with employer without written consent.

  E. Members shall make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in breach of a duty.

  Correct Answer: A

  Standard II states: "Members shall not copy or use, in substantially the same form as the original, material prepared by another without acknowledging and identifying the name of the author, publisher or source of such material."

• Question 3853:

  Which of the following is not a violation of Standard II (C)?

  A. Use a small part of an analysts work who also is employed in a completely different (non-competitive) industry, without acknowledgment.

  B. Use a small part of an analysts work who also is employed in the same industry, without acknowledgment.

  C. All of these answers are violations.

  D. Using one chart in a presentation that was prepared by another analyst, without acknowledgment.

  E. Giving an oral report and citing specific quotations, attributable to "leading analysts," without specific reference.

  Correct Answer: C

  Using excerpts from articles or reports prepared by others, either verbatim, or with only a slight change, without acknowledgment; citing specific quotations, attributable to "leading analysts," without specific reference; using charts or graphs without stating their sources; and copying proprietary computerized spreadsheets or algorithms without seeking the authorization of their creators - all of these practices are violations of Standard II (C). Only globally recognized sources of factual material such as that provided by Standard and Poor's, or Moody's Investors Service, can be used without acknowledgment, since such information is already in the public realm.

• Question 3854:

  Standard IV (B.5) deals with ________.

  A. Disclosure of Conflicts to Clients and Prospects

  B. Prohibition against Use of Material Nonpublic Information

  C. None of these answers

  D. Preservation of Confidentiality

  E. Prohibition against Misrepresentation

  F. Priority of Transactions

  G. Disclosure of Referral Fees

  H. Performance Presentation

  Correct Answer: D

  Standard IV (B.5) deals with the preservation of confidentiality of information communicated by clients or employers concerning matters within the scope of the client-member, employer-member relationship.

• Question 3855:

  To claim compliance with the AIMR Performance Presentation Standards,

  A. at least 1/2 of the investment managers in the firm must comply with the Standards.

  B. the entire firm must comply with the Standards.

  C. none of these answers. The Standards apply to individual investment manager's performance only.

  D. at least 3/4 of the investment managers in the firm must comply with the Standards.

  Correct Answer: B

  To claim compliance with the AIMR-PPS, the firm must comply with the Standards on a firmwide basis. Additionally, the firm must state exactly how it is defining itself for purposes of compliance.

• Question 3856:

  Which of the following can be found in Standard I?

  A. Members shall maintain knowledge of and comply with all applicable laws.

  B. Members shall not undertake any independent practice in competition with employer without written consent.

  C. Members shall maintain appropriate records to support the reasonableness of recommendations.

  D. Members shall not participate in plagiarism.

  E. Members shall make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in breach of a duty.

  Correct Answer: A

  Standard I states that members shall: "A. Maintain knowledge of and comply with all applicable laws of any governing agency or professional association governing the member's professional activities, and B. Not knowingly participate or assist in any violation of laws, rules or regulations."

• Question 3857:

  Which of the following is/are true about the definition of "total firm assets" where PPS are concerned?

  I. Total assets include non-discretionary as well as discretionary assets.

  II. Unless the firm actually manages the assets underlying investment strategies, they are not included in the definition of total assets.

  III.

  Assets assigned to subadvisors which are not directly under the firm's management should not be included as part of "total assets."

  A.

  I, II and III

  B.

  I and III only

  C.

  II and III only

  D.

  I and II only

  Correct Answer: A

• Question 3858:

  Which of the following AIMR standards states that a member shall not knowingly participate, or assist, in any violation of applicable laws, regulations, or the Code and Standards?

  A. III

  B. VI

  C. V

  D. I

  Correct Answer: D

  Standard I: Fundamental Responsibilities states: "Members shall: A. Maintain knowledge of and comply with all applicable laws, rules and regulations of any government, governmental agency, regulatory organization, licensing agency, or professional association governing the members' professional activities, and B. Not knowingly participate or assist in any violation of such laws, rules, or regulations."

• Question 3859:

  Which of the following rules apply for calculations under the Performance Presentation Standards?

  A. Accrual accounting must be used for fixed-income securities.

  B. All of these answers.

  C. Total return, including realized and unrealized gains and losses, must be used.

  D. Time-weighted rate of return must be used.

  Correct Answer: B

  All of these answers are general rules applying to calculation of returns under the PPS.

• Question 3860:

  According to the AIMR-PPS when presenting the performance record of composites containing portfolios that use leverage, which of the following statements are true?

  A. If the use of leverage is discretionary, the performance presented must include the effects of the leverage.

  B. If the use of leverage is discretionary, performance on a restated, all-cash basis must be provided.

  C. All of these statements are true.

  D. If the use of leverage is nondiscretionary, performance must be presented on an all-cash basis.

  Correct Answer: C

  For composites containing portfolios that use leverage, all of the statements are true. This is a requirement for presentation of results.