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

• Question 3951:

  Standard IV (B.8), Disclosure of Referral Fees, includes ________.

  A. referral fees paid in cash

  B. referral fees paid "in kind"

  C. soft dollar referral fees

  D. all of these answers

  Correct Answer: D

  Under Standard IV (B.8), appropriate disclosure involves disclosing the nature of the consideration or benefit given or received for the recommending of services. Consideration includes all fees, whether paid in cash, in soft dollars, or in kind.

• Question 3952:

  Which of the following relating to compliance procedures for complying with Standard III (E) is false? The compliance procedures should:

  A. none of these answers.

  B. outline permissible conduct.

  C. delineate procedures for reporting violations and sanctions.

  D. designate a team of outside colleagues to form a review board.

  E. outline the scope of the procedures.

  F. be easy to understand.

  Correct Answer: D

  The compliance officer should be designated from within the firm.

• Question 3953:

  According to the AIMR-PPS for venture and private placements, ________ internal rate of return must be presented since inception of the fund and be net of fees, expenses and carry to the limited partner.

  A. limited

  B. extended

  C. cumulative

  D. general

  Correct Answer: C

  Cumulative internal rate of return must be presented since inception of the fund and be net of fees, expenses and carry to the limited partner. Irr must be calculated based on cash-on-cash returns plus residual value.

• Question 3954:

  ________ and other hybrid securities must be treated consistently across and within composites.

  A. Portfolios

  B. Convertibles

  C. Assets

  D. Bonds

  Correct Answer: B

  This is one of the requirements which is mandatory in order to be in compliance with the PPS.

• Question 3955:

  If a firm uses non-discretionary leverage, it must present performance using:

  A. both actual returns and all-cash basis.

  B. all-cash basis i.e. removing leverage effects.

  C. actual returns.

  D. none of these answers.

  Correct Answer: B

  According to Section B of the PPS standards - "Calculation of Returns" - for non-discretionary leverage, performance must be presented on an all-cash returns basis.

• Question 3956:

  Which of the following is/are true about the Performance Presentation Standards?

  I. A member who complies with the mandatory requirements of the PPS but does not follow the recommended requirements can publicly claim compliance with the PPS.

  II. The PPS are designed to be primarily a performance measurement framework.

  III.

  The Standards are not designed to enhance or detract from the presentation of historical results.

  A.

  III only

  B.

  II and III only

  C.

  I, II and III

  D.

  I and III only

  Correct Answer: D

  The PPS are designed to be primarily a performance presentation system, not a performance measurement system. The Standards are not designed to enhance or detract from the usefulness of the information in historical results, though it does restrict the way they are to be presented. The PPS are voluntary standards and are not necessarily binding on AIMR members. Some standards are mandatory while others are recommended. To claim compliance, members must abide by the mandatory requirements, at the very least.

• Question 3957:

  Another name for "access" person is ________.

  A. none of these answers

  B. supervisor

  C. ombudsman

  D. guardian

  E. fiduciary

  F. covered person

  Correct Answer: F

  Access or covered persons have knowledge of pending or actual investment recommendations or action. The firm's definition of access (covered) person should be broad enough to cover all people with that knowledge.

• Question 3958:

  Standard III (D) deals with ________.

  A. Professional Misconduct

  B. Use of Professional Designation

  C. Plagiarism

  D. Fundamental Responsibilities

  E. None of these answers

  F. Obligation to Inform Employer of Code and Standards

  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 (D) deals with the Disclosure of Additional Compensation Arrangements.

• Question 3959:

  Standard IV (B.7) deals with ________.

  A. Priority of Transactions

  B. None of these answers

  C. Disclosure of Referral Fees

  D. Performance Presentation

  E. Prohibition against Misrepresentation

  F. Disclosure of Conflicts to Clients and Prospects

  G. Preservation of Confidentiality

  H. Prohibition against Use of Material Nonpublic Information

  Correct Answer: F

  Standard IV (B.7) states that members shall disclose to their clients all matters that could become potential conflicts. These include beneficial ownership of securities or other investments, that reasonably could be expected to impair the member's ability to make unbiased and objective recommendations.

• Question 3960:

  According to the AIMR-PPS, ________ are defined to include all discretionary and nondiscretionary assets.

  A. individually managed assets

  B. individual investor's assets

  C. total firm assets

  D. global assets

  Correct Answer: C

  Total firm assets are defined to include all discretionary and nondiscretionary assets. Total firm assets don't refer to assets underlying overlay investment strategies, such as currency overlay, options and futures overlays, securities lending programs and asset allocation overlay strategies, unless the firm actually manages the underlying assets.