STUDENTS SUCCESS
Revision Examination Tests
“Come all for this Greatness”
... 100% Correct Ans ...
MOCK EXAM 2 (NO CALCULATOR) TEST 2024-2025 ACTUAL EXAM COMPLETE
QUESTIONS AND CORRECT DETAILED ANSWERS
Courtney Johnson, CFA, manages equity accounts and recommends Reliable
Management to clients who ask about fixed-income investments. Reliable, in turn,
provides Johnson with equity research. Johnson has not informed her equity clients,
who are always very happy with Reliable's performance, of the arrangement with
Reliable. Johnson has violated:
A: none of the Standards.
B: the Standard concerning client referrals.
C: the Standard concerning soft dollar arrangements
Ans: B - Standard VI(C) Referral Fees requires members and candidates to disclose
to clients and prospects any consideration or benefit received by the member for the
recommendation of any service. "Soft dollars" refers to benefits received from client
brokerage. (Module 71.8, LOS 71.b)
Quiz Russell Finley, CFA, is a managing director at Wilson Brothers and is
responsible for the supervision of all trading and sales operations. Finley receives
information indicating that a sales assistant made personal trades on a restricted
security. According to the Standard regarding responsibilities of supervisors, the
least appropriate action for Finley to take is to:
A: begin an investigation to determine the extent of the wrongdoing.
B: restrict and increase the monitoring of the employee's activities at the firm.
C: speak directly to the employee and attain assurance that the violation will not be
repeated.
Ans: C - Standard IV(C) Responsibilities of Supervisors explicitly states that
speaking to the employee to determine the extent of the violations and receiving
assurances that it will not be repeated is not enough. Finley must take positive steps
to ensure that the violation will not be repeated, including promptly launching an
investigation and limiting the employee's activities and/or increasing supervision of
the employee until the results of the investigation are known. (Module 71.6, LOS
71.b)
,Quiz Charlotte Stein, a CFA candidate, received a copy of a stock selection model
designed by a Wall Street analyst friend, who told her she was free to use it. After
reviewing the program and making some adjustments, Stein shows the new model to
her supervisor. Her supervisor says she did a great job and tells Stein to incorporate
the new model in her next industry review. Stein has:
A: violated the Standard concerning misrepresentation.
B: violated the Standard concerning conflicts of interest.
C: not violated CFA Institute Standards of Professional Conduct.
Ans: A - Stein violated Standard I(C) Misrepresentation by presenting material
developed by another to her supervisor without disclosing that the work was not her
own. (Module 71.2, LOS 71.b)
Quiz Justin Matthews, CFA, is chief financial officer of a bank and serves on the
bank's investment committee. The majority of the committee has voted to invest in
medium-term euro debt. Matthews feels very strongly that this is a poor strategy and
that trends in both the exchange rate and in euro interest rates over the next year will
result in large losses on the position. According to the Code and Standards,
Matthews should most appropriately:
A: document his difference of opinion with the committee.
B: express his concerns to the bank's chief executive officer directly.
C: dissociate from the recommendation by asking that his name not be included.
Ans: A - Standard V(A) Diligence and Reasonable Basis states that if a consensus
opinion has a reasonable basis, a member or candidate who disagrees with it does
not have to dissociate from it but should document the difference of opinion. (Module
71.7, LOS 71.b)
Quiz Howard Klein, CFA, supervises a group of research analysts, none of whom is
a CFA charterholder or CFA candidate. He has attempted on several occasions to
get his firm to adopt a compliance system to ensure that applicable laws and
regulations are followed. The firm's principals, however, have never adopted his
recommendations. According to CFA Institute Standards of Professional Conduct,
Klein at this point:
A: should decline in writing to accept supervisory responsibility until his firm adopts
reasonable compliance procedures.
B: needs to take no action because the employees are not CFA charterholders or
CFA candidates.
C: must resign from the company and document in writing his reasons for doing so.
Ans: A - Under Standard IV(C) Responsibilities of Supervisors, if Klein clearly
cannot discharge supervisory responsibilities because of an inadequate compliance
system, he should decline in writing to accept the supervisory responsibility until the
firm adopts reasonable procedures to allow him to adequately exercise such
responsibility. (Module 71.6, LOS 71.b)
,Quiz Lisa Crocker, CFA, manages several pension accounts and directs most of her
trades to Zeta Brokers, which provides excellent trade execution as well as equities
research. Regional Brokers, which also has excellent trading services, has offered to
execute trades for Crocker at half the commission rate she pays Zeta, but Regional
does not supply equities research. If Crocker declines to switch her business from
Zeta to Regional, has she violated any CFA Institute Standards of Professional
Conduct?
A: Yes, because she has not obtained explicit permission from her clients to use
Zeta.
B: No, if the higher commissions are justified by the value of the research services
she receives.
C: Yes, because the Standard concerning loyalty, prudence, and care states that she
must minimize trading costs for her accounts.
Ans: B - According to Standard III(A) Loyalty, Prudence, and Care, Crocker may pay
higher fees without violating her fiduciary duty as long as the research benefits the
firm's clients and the commission paid is reasonable in relation to the research and
execution of services received. ( Module 71.4, LOS 71.b)
Quiz Katrina Anderson, CFA, left her job as an account manager at RTJ Capital
Management and joined Parnell Associates. Anderson did not sign a noncompete
agreement at RTJ and took no RTJ property with her when she left. According to
CFA Institute Standards of Professional Conduct, Anderson:
A: must not harm RTJ by soliciting her previous clients.
B: is free to contact her previous clients at RTJ after her employment there ends.
C: must seek permission from RTJ before contacting her previous clients there.
Ans: B - Standard IV(A) Loyalty does not prohibit former employees from contacting
clients of their previous firm so long as the contact information does not come from
the records of the previous employer or violate a noncompete agreement. (Module
71.6, LOS 71.b)
Quiz Scott Houser, CFA, is a widely known equity analyst whose recommendations
often influence share prices. Houser changes his recommendation to "Sell" on
Drywall Company and distributes this recommendation only to his clients, many of
whom act on the recommendation before it becomes known to the public. Has
Houser violated the Code and Standards? (Module 71.3, LOS 71.b)
A: No.
B: Yes, he has violated the Standard concerning communications with clients.
C: Yes, he has violated the Standard concerning material nonpublic information.
Ans: A - Houser has not violated the Code and Standards. Guidance for Standard
II(A) Material Nonpublic Information states that an analyst does not need to make his
recommendations public just because investors would want to know about them, and
is free to issue recommendations only to his clients. The guideline about what makes
information material (i.e., investors would want to have the information before
making an investment decision) applies to nonpublic information from the issuer of a
, security. An analyst covering the security, however, is not an insider with the issuing
firm.(Module 71.3, LOS 71.b)
Quiz Isabelle Burns, CFA, is an investment advisor and holds shares of Torex in her
personal account because she thinks it is undervalued. According to the CFA
Institute Standards of Professional Conduct, Burns may:
A: recommend Torex to clients but must disclose her investment in Torex.
B: not recommend Torex to clients while she has a personal investment in the stock.
C: recommend Torex to clients for whom it is suitable without disclosing her
investment in Torex.
Ans: A - To comply with Standard VI(A) Disclosure of Conflicts, members and
candidates must make full disclosure of all matters that could impair their
independence. Sell-side members and candidates should disclose to their clients
any ownership in a security that they are recommending. (Module 71.8, LOS 71.b)
Quiz Christopher Kim, CFA, is a banker with Batts Brothers, an investment banking
firm. Kim follows the energy industry and has frequent contact with industry
executives. Kim is contacted by the CEO of a large oil and gas corporation who
wants Batts Brothers to underwrite a secondary offering of the company's stock. The
CEO offers Kim the opportunity to fly on his private jet to his ranch in Texas for an
exotic game hunting expedition if Kim's firm can complete the underwriting within 90
days. According to CFA Institute Standards of Conduct, Kim:
A: may accept the offer as long as he discloses the offer to Batts Brothers.
B: may not accept the offer because it is considered lavish entertainment.
C: must obtain written consent from Batts Brothers before accepting the offer.
Ans: C - According to Standard IV(B) Additional Compensation Arrangements,
members and candidates must obtain written permission from their employer before
accepting an offer of compensation (for the performance of work done for their
employer) in addition to what they receive from their employer and that is contingent
on future performance. (Module 71.6, LOS 71.b)
Quiz Kim Vance, CFA, tells a prospective client, "Over the three years I have been in
the business, my equity-oriented accounts have had a mean return of more than
20% a year." The statement is accurate, but the mean return was influenced by the
account of one client realizing a large gain on a position in a small-cap company he
took based on his own research. Without this account, the average gain would have
been 18% per year. Has Vance violated CFA Institute Standards of Professional
Conduct?
A: Yes, because the statement misrepresents Vance's performance.
B: Yes, because returns for an equities composite must be asset- weighted.
C: No, because it is accurate and Vance has not guaranteed such returns in the
future.
Ans: A - Standard III(D) Performance Presentation requires that statements about
performance be not only accurate but also fair and complete. While Vance's
Revision Examination Tests
“Come all for this Greatness”
... 100% Correct Ans ...
MOCK EXAM 2 (NO CALCULATOR) TEST 2024-2025 ACTUAL EXAM COMPLETE
QUESTIONS AND CORRECT DETAILED ANSWERS
Courtney Johnson, CFA, manages equity accounts and recommends Reliable
Management to clients who ask about fixed-income investments. Reliable, in turn,
provides Johnson with equity research. Johnson has not informed her equity clients,
who are always very happy with Reliable's performance, of the arrangement with
Reliable. Johnson has violated:
A: none of the Standards.
B: the Standard concerning client referrals.
C: the Standard concerning soft dollar arrangements
Ans: B - Standard VI(C) Referral Fees requires members and candidates to disclose
to clients and prospects any consideration or benefit received by the member for the
recommendation of any service. "Soft dollars" refers to benefits received from client
brokerage. (Module 71.8, LOS 71.b)
Quiz Russell Finley, CFA, is a managing director at Wilson Brothers and is
responsible for the supervision of all trading and sales operations. Finley receives
information indicating that a sales assistant made personal trades on a restricted
security. According to the Standard regarding responsibilities of supervisors, the
least appropriate action for Finley to take is to:
A: begin an investigation to determine the extent of the wrongdoing.
B: restrict and increase the monitoring of the employee's activities at the firm.
C: speak directly to the employee and attain assurance that the violation will not be
repeated.
Ans: C - Standard IV(C) Responsibilities of Supervisors explicitly states that
speaking to the employee to determine the extent of the violations and receiving
assurances that it will not be repeated is not enough. Finley must take positive steps
to ensure that the violation will not be repeated, including promptly launching an
investigation and limiting the employee's activities and/or increasing supervision of
the employee until the results of the investigation are known. (Module 71.6, LOS
71.b)
,Quiz Charlotte Stein, a CFA candidate, received a copy of a stock selection model
designed by a Wall Street analyst friend, who told her she was free to use it. After
reviewing the program and making some adjustments, Stein shows the new model to
her supervisor. Her supervisor says she did a great job and tells Stein to incorporate
the new model in her next industry review. Stein has:
A: violated the Standard concerning misrepresentation.
B: violated the Standard concerning conflicts of interest.
C: not violated CFA Institute Standards of Professional Conduct.
Ans: A - Stein violated Standard I(C) Misrepresentation by presenting material
developed by another to her supervisor without disclosing that the work was not her
own. (Module 71.2, LOS 71.b)
Quiz Justin Matthews, CFA, is chief financial officer of a bank and serves on the
bank's investment committee. The majority of the committee has voted to invest in
medium-term euro debt. Matthews feels very strongly that this is a poor strategy and
that trends in both the exchange rate and in euro interest rates over the next year will
result in large losses on the position. According to the Code and Standards,
Matthews should most appropriately:
A: document his difference of opinion with the committee.
B: express his concerns to the bank's chief executive officer directly.
C: dissociate from the recommendation by asking that his name not be included.
Ans: A - Standard V(A) Diligence and Reasonable Basis states that if a consensus
opinion has a reasonable basis, a member or candidate who disagrees with it does
not have to dissociate from it but should document the difference of opinion. (Module
71.7, LOS 71.b)
Quiz Howard Klein, CFA, supervises a group of research analysts, none of whom is
a CFA charterholder or CFA candidate. He has attempted on several occasions to
get his firm to adopt a compliance system to ensure that applicable laws and
regulations are followed. The firm's principals, however, have never adopted his
recommendations. According to CFA Institute Standards of Professional Conduct,
Klein at this point:
A: should decline in writing to accept supervisory responsibility until his firm adopts
reasonable compliance procedures.
B: needs to take no action because the employees are not CFA charterholders or
CFA candidates.
C: must resign from the company and document in writing his reasons for doing so.
Ans: A - Under Standard IV(C) Responsibilities of Supervisors, if Klein clearly
cannot discharge supervisory responsibilities because of an inadequate compliance
system, he should decline in writing to accept the supervisory responsibility until the
firm adopts reasonable procedures to allow him to adequately exercise such
responsibility. (Module 71.6, LOS 71.b)
,Quiz Lisa Crocker, CFA, manages several pension accounts and directs most of her
trades to Zeta Brokers, which provides excellent trade execution as well as equities
research. Regional Brokers, which also has excellent trading services, has offered to
execute trades for Crocker at half the commission rate she pays Zeta, but Regional
does not supply equities research. If Crocker declines to switch her business from
Zeta to Regional, has she violated any CFA Institute Standards of Professional
Conduct?
A: Yes, because she has not obtained explicit permission from her clients to use
Zeta.
B: No, if the higher commissions are justified by the value of the research services
she receives.
C: Yes, because the Standard concerning loyalty, prudence, and care states that she
must minimize trading costs for her accounts.
Ans: B - According to Standard III(A) Loyalty, Prudence, and Care, Crocker may pay
higher fees without violating her fiduciary duty as long as the research benefits the
firm's clients and the commission paid is reasonable in relation to the research and
execution of services received. ( Module 71.4, LOS 71.b)
Quiz Katrina Anderson, CFA, left her job as an account manager at RTJ Capital
Management and joined Parnell Associates. Anderson did not sign a noncompete
agreement at RTJ and took no RTJ property with her when she left. According to
CFA Institute Standards of Professional Conduct, Anderson:
A: must not harm RTJ by soliciting her previous clients.
B: is free to contact her previous clients at RTJ after her employment there ends.
C: must seek permission from RTJ before contacting her previous clients there.
Ans: B - Standard IV(A) Loyalty does not prohibit former employees from contacting
clients of their previous firm so long as the contact information does not come from
the records of the previous employer or violate a noncompete agreement. (Module
71.6, LOS 71.b)
Quiz Scott Houser, CFA, is a widely known equity analyst whose recommendations
often influence share prices. Houser changes his recommendation to "Sell" on
Drywall Company and distributes this recommendation only to his clients, many of
whom act on the recommendation before it becomes known to the public. Has
Houser violated the Code and Standards? (Module 71.3, LOS 71.b)
A: No.
B: Yes, he has violated the Standard concerning communications with clients.
C: Yes, he has violated the Standard concerning material nonpublic information.
Ans: A - Houser has not violated the Code and Standards. Guidance for Standard
II(A) Material Nonpublic Information states that an analyst does not need to make his
recommendations public just because investors would want to know about them, and
is free to issue recommendations only to his clients. The guideline about what makes
information material (i.e., investors would want to have the information before
making an investment decision) applies to nonpublic information from the issuer of a
, security. An analyst covering the security, however, is not an insider with the issuing
firm.(Module 71.3, LOS 71.b)
Quiz Isabelle Burns, CFA, is an investment advisor and holds shares of Torex in her
personal account because she thinks it is undervalued. According to the CFA
Institute Standards of Professional Conduct, Burns may:
A: recommend Torex to clients but must disclose her investment in Torex.
B: not recommend Torex to clients while she has a personal investment in the stock.
C: recommend Torex to clients for whom it is suitable without disclosing her
investment in Torex.
Ans: A - To comply with Standard VI(A) Disclosure of Conflicts, members and
candidates must make full disclosure of all matters that could impair their
independence. Sell-side members and candidates should disclose to their clients
any ownership in a security that they are recommending. (Module 71.8, LOS 71.b)
Quiz Christopher Kim, CFA, is a banker with Batts Brothers, an investment banking
firm. Kim follows the energy industry and has frequent contact with industry
executives. Kim is contacted by the CEO of a large oil and gas corporation who
wants Batts Brothers to underwrite a secondary offering of the company's stock. The
CEO offers Kim the opportunity to fly on his private jet to his ranch in Texas for an
exotic game hunting expedition if Kim's firm can complete the underwriting within 90
days. According to CFA Institute Standards of Conduct, Kim:
A: may accept the offer as long as he discloses the offer to Batts Brothers.
B: may not accept the offer because it is considered lavish entertainment.
C: must obtain written consent from Batts Brothers before accepting the offer.
Ans: C - According to Standard IV(B) Additional Compensation Arrangements,
members and candidates must obtain written permission from their employer before
accepting an offer of compensation (for the performance of work done for their
employer) in addition to what they receive from their employer and that is contingent
on future performance. (Module 71.6, LOS 71.b)
Quiz Kim Vance, CFA, tells a prospective client, "Over the three years I have been in
the business, my equity-oriented accounts have had a mean return of more than
20% a year." The statement is accurate, but the mean return was influenced by the
account of one client realizing a large gain on a position in a small-cap company he
took based on his own research. Without this account, the average gain would have
been 18% per year. Has Vance violated CFA Institute Standards of Professional
Conduct?
A: Yes, because the statement misrepresents Vance's performance.
B: Yes, because returns for an equities composite must be asset- weighted.
C: No, because it is accurate and Vance has not guaranteed such returns in the
future.
Ans: A - Standard III(D) Performance Presentation requires that statements about
performance be not only accurate but also fair and complete. While Vance's
