Ethics

Question 0

Standards for I-VII

Answer 0

Professionalism

Integrity of Capital Markets

Duty to Clients

Duty to Employer

Investment analysis, Recommendations, and Actions

Conflicts of Interest

Responsibilities as a CFA Member or Candidate

PIDDICR

Question 1

Three steps to solve soft dollar conflicts

Answer 1

1. Define the product or service 2. Primary use to benefit client in investment decision making process? 3. Is there another use? Must allocate the cost.

Question 2

Three components of a rating system

Answer 2

1. A recommendation scale/categories (buy, hold, sell, etc.)
2. Time horizon categories
3. Risk categories

Question 3

Conflicts of Interest - Priority of Transactions recommend what trading policies?

Answer 3

Both pre-clearance of trades and duplicate confirmations for trades executed by analysts.

Question 4

Changes in Prudent Investor Rule

Answer 4

No investment is imprudent per se. It used to be that speculative or non-income producing investments were not allowed.

Question 5

Prudent Investor Rule (5 principles)

Answer 5

1. Diversification is ordinarily required
2. Risk and return are related and should be appropriate
3. Avoid fees and costs that are not justified
4. Impartiality balancing of current income and growth
5. Delegate like a prudent investor would