WVU FIN 512 questions with answers.
Under CFA Institute Standard III(A): Loyalty, Prudence, and Care, CFA Institute members must exercise
the same level of prudent judgment and reasonable care that they would apply in the management and
disposition of their own interests in similar circumstances. ANS -True
The exercise of prudence by investment professionals requires caution and discretion, and that they act
with the care, skill, and diligence that a reasonable person acting in a similar capacity and familiar with
such matters would use. ANS -True
Under the Code and Standards, an investment adviser must thoroughly consider an investment's place
in the client's overall financial portfolio, regardless of whether the adviser is aware of or responsible for
managing all of the client's financial assets. ANS -False
The conduct required of members and candidates in fulfilling their obligations under CFA
Institute Standard III(A): Loyalty, Prudence, and Care depends on:
I. the nature of their professional responsibilities.
II. the relationships they have with clients.
IlI. the nature of the services being provided. ANS -I, II, III
An asset adviser managing the investments of individual clients must ensure that: ANS -investment
decisions are judged in the context of the client's total portfolio rather than by individual investments in
the portfolio.
George is a junior research analyst who provides basic research support for more senior analysts at his
firm who, in turn, make investment recommendations to the firm's portfolio managers. Under the Code
and Standards, George: ANS -has a duty of loyalty to firm clients and must act in their best interests.
CFA Institute members work in many different roles in the investment industry. For individual members
providing services to clients as commission-based brokers that do not offer investment advice, which of
the following best describes how the standard of loyalty, prudence, and care applies? ANS -The
, commission-based broker must work prudently in the interest of the client while executing the
requested transaction.
An investment manager may pay a higher brokerage commission than normal to obtain goods or
services, without corresponding benefit to the client, by using "soft dollars" or a "soft commission" to
purchase research services. ANS -False
Under the Code and Standards, whether a CFA Institute member has a duty of loyalty, prudence, and
care will depend on his or her job responsibilities, local laws, and whether the member has direct
interaction with clients. ANS -False
Acting with loyalty mandates that investment actions be carried out in the best interest of the client
given the known facts and circumstances. ANS -True
CFA Institute Standard III(B): Fair Dealing requires that CFA Institute members treat all clients fairly in
light of their investment objectives and circumstances by fairly allocating investment opportunities. ANS
-True
Phoung has a number of investment management clients. He gives discounts from his standard
investment management fee rate to clients who have $25 million or more in their accounts. He also
provides personalized service to these clients, regularly checking in with them by phone to discuss new
investment opportunities. Phoung: ANS -has not violated the Code and Standards as long as his
increased level of service to some clients has not disadvantaged other clients and he has disclosed his
different levels of service to all his clients.
Amelia receives new information that changes her opinion of the value of a security. To comply with the
Code and Standards, she must provide this information to: ANS -only clients for whom this investment
is suitable.
Reza is an investment manager whose clients include his parents, his wife's parents, and his brother and
sister. Under the Code and Standards, Reza should treat all his clients fairly by: ANS -not treating his
family member accounts any differently from other client accounts.
To encourage fair dealing among clients, CFA Institute members should: ANS -limit the number of
people who are privy to the fact that a recommendation is going to be disseminated to clients.
Under CFA Institute Standard III(A): Loyalty, Prudence, and Care, CFA Institute members must exercise
the same level of prudent judgment and reasonable care that they would apply in the management and
disposition of their own interests in similar circumstances. ANS -True
The exercise of prudence by investment professionals requires caution and discretion, and that they act
with the care, skill, and diligence that a reasonable person acting in a similar capacity and familiar with
such matters would use. ANS -True
Under the Code and Standards, an investment adviser must thoroughly consider an investment's place
in the client's overall financial portfolio, regardless of whether the adviser is aware of or responsible for
managing all of the client's financial assets. ANS -False
The conduct required of members and candidates in fulfilling their obligations under CFA
Institute Standard III(A): Loyalty, Prudence, and Care depends on:
I. the nature of their professional responsibilities.
II. the relationships they have with clients.
IlI. the nature of the services being provided. ANS -I, II, III
An asset adviser managing the investments of individual clients must ensure that: ANS -investment
decisions are judged in the context of the client's total portfolio rather than by individual investments in
the portfolio.
George is a junior research analyst who provides basic research support for more senior analysts at his
firm who, in turn, make investment recommendations to the firm's portfolio managers. Under the Code
and Standards, George: ANS -has a duty of loyalty to firm clients and must act in their best interests.
CFA Institute members work in many different roles in the investment industry. For individual members
providing services to clients as commission-based brokers that do not offer investment advice, which of
the following best describes how the standard of loyalty, prudence, and care applies? ANS -The
, commission-based broker must work prudently in the interest of the client while executing the
requested transaction.
An investment manager may pay a higher brokerage commission than normal to obtain goods or
services, without corresponding benefit to the client, by using "soft dollars" or a "soft commission" to
purchase research services. ANS -False
Under the Code and Standards, whether a CFA Institute member has a duty of loyalty, prudence, and
care will depend on his or her job responsibilities, local laws, and whether the member has direct
interaction with clients. ANS -False
Acting with loyalty mandates that investment actions be carried out in the best interest of the client
given the known facts and circumstances. ANS -True
CFA Institute Standard III(B): Fair Dealing requires that CFA Institute members treat all clients fairly in
light of their investment objectives and circumstances by fairly allocating investment opportunities. ANS
-True
Phoung has a number of investment management clients. He gives discounts from his standard
investment management fee rate to clients who have $25 million or more in their accounts. He also
provides personalized service to these clients, regularly checking in with them by phone to discuss new
investment opportunities. Phoung: ANS -has not violated the Code and Standards as long as his
increased level of service to some clients has not disadvantaged other clients and he has disclosed his
different levels of service to all his clients.
Amelia receives new information that changes her opinion of the value of a security. To comply with the
Code and Standards, she must provide this information to: ANS -only clients for whom this investment
is suitable.
Reza is an investment manager whose clients include his parents, his wife's parents, and his brother and
sister. Under the Code and Standards, Reza should treat all his clients fairly by: ANS -not treating his
family member accounts any differently from other client accounts.
To encourage fair dealing among clients, CFA Institute members should: ANS -limit the number of
people who are privy to the fact that a recommendation is going to be disseminated to clients.
