Ethics & Investment Consulting Process Flashcards
7 cards from real CIMA 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 & Investment Consulting Process flashcards as text
A CIMA professional discovers that a colleague is recommending unsuitable products to elderly clients for higher commissions. What is the FIRST appropriate action?
Answer: Discuss the concern with the colleague and, if unresolved, escalate internally
Ethics standards require addressing concerns directly first, then escalating through proper internal channels before external reporting.
In the investment consulting process, which step immediately follows the client discovery phase?
Answer: Investment policy statement development
After gathering client information in discovery, the next step is formalizing objectives and constraints in an Investment Policy Statement (IPS).
A consultant receives a gift worth $500 from an asset manager seeking to win business. Under CIMA standards, this should be:
Answer: Declined or disclosed and approved per firm policy before acceptance
Material gifts from third parties must be disclosed and approved per firm policy to avoid conflicts of interest.
Which fiduciary concept requires a consultant to act solely in the client's best interest rather than their own or their firm's interest?
Answer: Duty of loyalty
The duty of loyalty obligates fiduciaries to prioritize client interests above all competing interests.
When constructing an Investment Policy Statement, which element defines the maximum acceptable loss a client can sustain in any given period?
Answer: Risk tolerance
Risk tolerance specifies the level of loss a client can emotionally and financially withstand, forming a key constraint in the IPS.
A CIMA charterholder uses material non-public information about a merger to advise clients to buy shares of the target company. This violates:
Answer: Securities laws and CIMA's code of ethics prohibiting insider trading
Trading on material non-public information violates securities laws and CIMA's prohibition on insider trading, regardless of client benefit.
In manager due diligence, which qualitative factor is MOST critical when evaluating a portfolio manager's long-term reliability?
Answer: Stability and depth of the investment team
Team stability and depth are primary qualitative indicators of a manager's ability to sustain its investment process over time.