Practice Test GeeksCIM - Chartered Investment Manager Practice Test
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Ethics & Regulatory Standards Flashcards

7 cards from real CIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Ethics & Regulatory Standards flashcards as text

  1. Under the Investment Advisers Act of 1940, which duty requires an adviser to place client interests ahead of its own at all times?

    Answer: Fiduciary duty of loyalty

    The SEC interprets the Advisers Act as imposing a fiduciary duty of care and loyalty, requiring advisers to put client interests first.

  2. A portfolio manager receives material nonpublic information about a pending merger from a friend at the target firm. What should the manager do?

    Answer: Refrain from trading and communicate the issue to compliance

    Acting on material nonpublic information violates insider trading laws, so the manager must not trade and should escalate to compliance.

  3. Section 28(e) of the Securities Exchange Act provides a safe harbor for which practice?

    Answer: Paying higher commissions for eligible research and brokerage services

    Section 28(e) protects managers who pay more than the lowest commission in good faith for eligible research and brokerage services.

  4. Which SEC form must a registered investment adviser deliver to clients describing its services, fees, and conflicts of interest?

    Answer: Form ADV Part 2A brochure

    Form ADV Part 2A is the plain-English brochure disclosing an adviser's business practices, fees, and conflicts.

  5. When a hot IPO is oversubscribed, how should a manager allocate shares among eligible client accounts to satisfy fair dealing?

    Answer: Allocate pro rata according to a predetermined policy

    Fair dealing requires a consistent, documented allocation method such as pro rata distribution among eligible accounts.

  6. Regulation Best Interest (Reg BI) primarily applies to which type of firm?

    Answer: Broker-dealers making recommendations to retail customers

    Reg BI requires broker-dealers to act in the best interest of retail customers when making recommendations.

  7. Under the SEC Custody Rule (Rule 206(4)-2), an adviser with custody of client assets generally must:

    Answer: Use a qualified custodian and undergo a surprise examination

    The Custody Rule requires client assets to be held by a qualified custodian, typically with an annual surprise exam by an independent accountant.