Changing Investment Objectives – Question Bank
LO.a: Evaluate the disclosure of investment objectives and basic policies and determine
whether they comply with the CFA Institute Standards of Professional Conduct.
LO.b: Describe appropriate actions needed to ensure adequate disclosure of the investment
process.
1. By marketing the Paine Webber Short-Term US Government Fund as a low volatility
investment, but then deviating from the Fund’s investment objective and investment policy
without seeking clients’ approval, Mitchell Hutchins’ Fund violated the CFA Institute
Standard relating to: A. suitability.
B. communication with clients and prospective clients.
C. both.
2. Which of the following is correct regarding the CFA Institute Standard relating to
suitability? Members and candidates have a responsibility to:
A. take investment actions and recommendations that are consistent with the stated mandate
and constraints of the portfolio.
B. disclose those factors that are important to their investment analyses, recommendations,
or actions in their communication with clients.
C. disclose to their clients any compensation, or benefit received from or paid to others for
referrals.
3. Which fof fthe ffollowing fstatements fis fleast flikely ftrue fwith frespect fto fcommunication fwith
fclients fand fprospective fclients? fMembers fand fcandidates fshould: f
A. disclose fthe fgeneral finvestment fprocess fand fsecurity fselection fused ffor fportfolio
fconstruction fand fnotify fclients fof fany fmaterial fchanges. f
B. promptly fdisclose fcertain flimitations fand frisks fupon fclients’ frequests. f
C. ensure fthat fcommunication fregarding fthe finvestment fperformance fis ffair, faccurate, fand
fcomplete. f
f
4. Which fof fthe ffollowing fleast flikely frelates fto fStandard fIII(C) f– fSuitability fand fStandard
fV(B) fCommunication fwith fClients. fCFA fInstitute fmembers fare frequired fto: f
A. conduct fa fjudicious finquiry finto fan finvestor’s ffinancial fsituation, finvestment fhistory,
fand finvestment fobjectives fwhen fconstructing fa fportfolio. f
B. communicate fto fclients, fthe fgeneral fprinciples fof fthe finvestment fprocesses finvolving
fsecurity fselection fand fportfolio fconstruction fat fthe finitiation fof fthe frelationship fand
fon fa fregular fbasis. f
C. refrain ffrom fpractices fthat fmislead finvestors fby fdistorting fprices for fmanipulating
ftrading fvolume. f
f
5. Which fof fthe ffollowing fmost flikely frelates fto fStandard fV(B) fCommunication fwith
fClients. fCFA fInstitute fmembers fare frequired: f f
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LO.a: Evaluate the disclosure of investment objectives and basic policies and determine
whether they comply with the CFA Institute Standards of Professional Conduct.
LO.b: Describe appropriate actions needed to ensure adequate disclosure of the investment
process.
1. By marketing the Paine Webber Short-Term US Government Fund as a low volatility
investment, but then deviating from the Fund’s investment objective and investment policy
without seeking clients’ approval, Mitchell Hutchins’ Fund violated the CFA Institute
Standard relating to: A. suitability.
B. communication with clients and prospective clients.
C. both.
2. Which of the following is correct regarding the CFA Institute Standard relating to
suitability? Members and candidates have a responsibility to:
A. take investment actions and recommendations that are consistent with the stated mandate
and constraints of the portfolio.
B. disclose those factors that are important to their investment analyses, recommendations,
or actions in their communication with clients.
C. disclose to their clients any compensation, or benefit received from or paid to others for
referrals.
3. Which fof fthe ffollowing fstatements fis fleast flikely ftrue fwith frespect fto fcommunication fwith
fclients fand fprospective fclients? fMembers fand fcandidates fshould: f
A. disclose fthe fgeneral finvestment fprocess fand fsecurity fselection fused ffor fportfolio
fconstruction fand fnotify fclients fof fany fmaterial fchanges. f
B. promptly fdisclose fcertain flimitations fand frisks fupon fclients’ frequests. f
C. ensure fthat fcommunication fregarding fthe finvestment fperformance fis ffair, faccurate, fand
fcomplete. f
f
4. Which fof fthe ffollowing fleast flikely frelates fto fStandard fIII(C) f– fSuitability fand fStandard
fV(B) fCommunication fwith fClients. fCFA fInstitute fmembers fare frequired fto: f
A. conduct fa fjudicious finquiry finto fan finvestor’s ffinancial fsituation, finvestment fhistory,
fand finvestment fobjectives fwhen fconstructing fa fportfolio. f
B. communicate fto fclients, fthe fgeneral fprinciples fof fthe finvestment fprocesses finvolving
fsecurity fselection fand fportfolio fconstruction fat fthe finitiation fof fthe frelationship fand
fon fa fregular fbasis. f
C. refrain ffrom fpractices fthat fmislead finvestors fby fdistorting fprices for fmanipulating
ftrading fvolume. f
f
5. Which fof fthe ffollowing fmost flikely frelates fto fStandard fV(B) fCommunication fwith
fClients. fCFA fInstitute fmembers fare frequired: f f
Copyright © IFT. All rights reserved. Page 1
