Ethical and Professional Standards Flashcards

A buy-side analyst is offered a fully paid ski trip by a company's investor relations department before an earnings call. Under CFA Standards, the analyst should:

Answer: Decline, as the gift could impair independence and objectivity

Lavish entertainment from a company being covered is likely to impair independence, regardless of disclosure or employer thresholds.

Under Standard III(B) – Fair Dealing, when disseminating investment recommendations, members must ensure:

Answer: Recommendations reach all clients in a manner that is fair and equitable

Standard III(B) requires that investment recommendations and changes be disseminated fairly and equitably to all clients.

Which of the following is the MOST appropriate step a CFA candidate must take before using CFA Institute's name in a marketing campaign?

Answer: Ensure usage complies with CFA Institute's trademark usage guidelines

CFA candidates and charterholders must comply with CFA Institute's trademark usage guidelines when referencing the designation.

The CFA Institute Research Objectivity Standards (ROS) recommend that firms restrict analyst personal trading in securities they cover primarily to:

Answer: Require pre-clearance and restrict trading during specific blackout windows

ROS best practices recommend pre-clearance requirements and blackout periods around research publications to manage conflicts.

A CFA member manages both a hedge fund charging performance fees and a mutual fund charging only management fees. Standard III(B) – Fair Dealing is BEST maintained by:

Answer: Establishing written allocation policies applied consistently before trading

Written, pre-established allocation policies applied consistently across accounts is the best practice for ensuring fair dealing.

Standard IV(C) – Responsibilities of Supervisors requires CFA members in supervisory roles to:

Answer: Implement compliance systems and take prompt action when violations occur

Standard IV(C) requires supervisors to establish and maintain compliance systems and respond promptly to detected violations.

An analyst's research report contains an error that would have lowered the target price significantly. After publication, the analyst discovers the mistake. Under Standard V(B), the analyst should:

Answer: Issue a corrected report promptly and notify all clients who received the original

Standard V(B) requires that material errors in published research be corrected promptly and that affected clients be notified.