Ethics and Professional Responsibility Flashcards

A CIMA professional manages both a charitable foundation and private client accounts with similar investment mandates. Shares of an undersubscribed IPO become available. What is the ethical approach to allocation?

Answer: Allocate shares proportionally based on each account's investment guidelines

Fair dealing requires that investment opportunities be allocated equitably across accounts with similar mandates, typically on a pro-rata basis.

Under CIMA's Standards of Professional Conduct, which statement about material nonpublic information is correct?

Answer: Trading on material nonpublic information is prohibited regardless of how it was obtained

CIMA ethics prohibit trading on material nonpublic information regardless of its source, including accidental disclosures or seemingly informal settings.

A wealth manager learns that a client is laundering money through their investment account. After internal reporting is ignored, what must the professional do?

Answer: Report the activity to appropriate regulatory or law enforcement authorities

When internal reporting fails to address illegal activity such as money laundering, the professional has an obligation to escalate to external authorities.

Which scenario most clearly illustrates a violation of the 'objectivity' principle in the CIMA Code?

Answer: Increasing a stock's target price after receiving a free all-expenses-paid conference trip from the issuer

Accepting material benefits from a covered company and then changing recommendations favorably is a direct violation of objectivity and creates a conflict of interest.

Which element is NOT a component of a fully compliant performance presentation under CIMA ethical standards?

Answer: Showing only top-performing accounts to attract new clients

Selectively presenting only top-performing accounts is cherry-picking and constitutes a misleading performance presentation under CIMA ethics.

A CIMA certificant is offered a consulting fee by a corporation to present their stock favorably to institutional clients. This arrangement must be:

Answer: Disclosed prominently to clients before any recommendation is made

Compensation from issuers for favorable coverage must be fully and prominently disclosed to clients so they can assess the potential bias.

Under CIMA standards, which best describes 'independence' in the context of investment research?

Answer: Research conclusions are based on objective analysis, free from undue pressure or conflicts

Independence in investment research means that analytical conclusions are reached through objective, unbiased analysis without influence from internal or external conflicts.