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

• Question 3871:

  Firms with records or performance calculations for periods prior to the applicable effective date(s) that are not in conformance with the AIMR Performance Presentation Standards can still claim compliance with the standards if certain conditions are met. Which of the following is an option available to such a firm?

  A. None of these answers are options available to such a firm.

  B. All of these answers are options available to such a firm.

  C. The firm can restate its historical performance in accordance with the Relaxed Retroactive Standards for retroactive compliance.

  D. The firm can use its nonconforming historical performance and disclose specifically when and how the performance is not in compliance.

  E. The firm can restate its historical performance numbers in accordance with the Standards.

  Correct Answer: B

  Firms with records or performance calculations for periods prior to the applicable effective date(s) that are not in conformance with the Standards can choose any of the options listed.

• Question 3872:

  Which of the following AIMR standards pertains to the responsibilities of supervisors?

  A. IV

  B. II C

  C. V

  D. None of these answers

  Correct Answer: D

  Responsibilities of Supervisors falls under Standard III (E).

• Question 3873:

  Which of the following is/are forms of plagiarism as defined by AIMR code of conduct?

  I. Using material from a seminar in research reports without proper acknowledgment.

  II. Presenting statistical estimates prepared by others without the associated caveats and qualifiers.

  III. Using of information obtained in a teleconference without identifying the original source.

  IV.

  Using Standard and Poor's estimates of stock betas without attribution.

  A.

  I, II and IV only

  B.

  I, II and III only

  C.

  II, III and IV only

  D.

  II and III only

  Correct Answer: B

  Standard II (C) - Prohibition against Plagiarism - considers a use of factual information published by recognized financial and statistical services without attribution acceptable. All of the others are forms of plagiarism and violations of Standard II (C).

• Question 3874:

  Which of the following can be found in Standard III?

  A. Members must use the CFA designation in a dignified manner.

  B. If members receive material nonpublic information in confidence, they shall not breach that confidence by trading or causing others to trade in securities to which such information relates.

  C. Members shall maintain knowledge of AIMR's Code of Ethics.

  D. Members shall comply with any prohibitions on activities imposed by their employer if a conflict of interest exists.

  E. Members shall make reasonable and diligent efforts to avoid any material misrepresentation in any research report or investment recommendation.

  Correct Answer: D

  Standard III states: "Members shall comply with any prohibitions on activities imposed by their employer if a conflict of interest exists."

• Question 3875:

  Which of the following can be found in Standard II?

  A. Members shall make reasonable and diligent efforts to avoid any material misrepresentation in any research report or investment recommendation.

  B. Members must use the CFA designation in a dignified manner.

  C. Members shall comply with any prohibitions on activities imposed by their employer if a conflict of interest exists.

  D. Members shall maintain knowledge of AIMR's Code of Ethics.

  E. If members receive material nonpublic information in confidence, they shall not breach that confidence by trading or causing others to trade in securities to which such information relates.

  Correct Answer: B

  Standard II states that holders of the CFA designation may use it, but only in a dignified and judicious manner. The use of the designation may be accompanied by an accurate explanation of the requirements that have been met to obtain the designation.

• Question 3876:

  Which of the following is/are true about the PPS?

  I. Accounts of clients that are not currently under the firm's management should not be included in the presentation of the historical performance results.

  II. Compliance with PPS cannot be met on a composite-by-composite basis, only on a firm-wide basis.

  III.

  The PPS require that firms report, at a minimum, at least the most recent 5 years (or since inception, if less than 5 years) of performance results.

  A.

  III only

  B.

  I only

  C.

  I and III only

  D.

  II only

  E.

  I, II and III

  F.

  I and II only

  G.

  II and III only

  Correct Answer: D

  The PPS require that firms report, at a minimum, at least the most recent 10 years (or since inception, if less than 10 years) of performance results. If this requirement cannot be met, exact reasons for this should be disclosed. Historical results should be presented as is to give a fair representation of past performance. Dropping portfolios selectively can bias the results. Also, Compliance with PPS cannot be met on a composite-by-composite basis, only on a firm-wide basis.

• Question 3877:

  Standard II (A) deals with ________.

  A. Obligation to Inform Employer of Code and Standards

  B. None of these answers

  C. Professional Misconduct

  D. Plagiarism

  E. Use of Professional Designation

  F. Duty to Employer

  G. Disclosure of Conflicts to Employer

  H. Fundamental Responsibilities

  Correct Answer: E

  Standard I deals with Fundamental Responsibilities. Standard II (A) deals with Use of Professional Designation. Standard II (B) deals with Professional Misconduct. Standard II (C) deals with Plagiarism. Standard III (A) deals with the Obligation to Inform Employer of Codes and Standards. Standard III (B) deals with the Duty to Employer. Standard III (C) deals with Disclosure of Conflicts to Employer.

• Question 3878:

  Since return results must be calculated on a basis that includes the effect of leverage, return results must be restated to a(n) ________ basis.

  A. margin

  B. total asset

  C. cash flow

  D. all cash

  E. multiple cash

  Correct Answer: D

  Return results must be calculated on a basis that includes the effect of leverage, return results must be restated to an all-cash basis when the portfolio used leverage and the same securities could have been purchased at the same prices if the portfolio has the cash to do so. Results should be restated to an all cash basis only when the necessary restatement can be based entirely on actual transactions and can be verified in accordance with applicable account standards.

• Question 3879:

  Standard IV (B.5), Preservation of Confidentiality states:

  A. all of these answers.

  B. none of these answers.

  C. members must release information to AIMR when the Professional Conduct Program is holding an investigation, unless there is a settlement agreement between the parties that stipulates confidentiality.

  D. if the information is confidential, even illegal activity may not be reported, because there is the issue of trust between parties.

  E. members should avoid disclosing any information received from a client except to authorized fellow employees who are also working for the client.

  Correct Answer: E

  Under Standard IV (B.5), members shall preserve the confidentiality of information communicated by clients within the scope of client-member or employer-member relationship, except when the member receives information concerning illegal activity on the part of the client. When there is an investigation under PCP, members shall provide information about a client in support of the investigation. Settlement agreements with confidentiality clauses do not prohibit members from cooperating with a PCP investigation.

• Question 3880:

  The Prudent Man Rule states that the trustee must achieve an equitable balance between current income and the ________ of principal in ________.

  A. prudent management; in money markets

  B. preservation; real terms

  C. steady growth; nominal terms

  D. preservation; nominal terms

  E. prudent management; in fixed-income securities

  F. steady growth; real terms

  Correct Answer: B

  Under the Prudent Man Rule, trustees must be impartial between income beneficiaries and remainder men and must achieve an equitable balance between current income and the preservation of principal in real terms.