Ethics and Professional Responsibility 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 and Professional Responsibility flashcards as text
Under the CIMA Code of Professional Responsibility, which action best demonstrates the duty of loyalty to a client?
Answer: Placing client interests ahead of personal financial gain
The duty of loyalty requires investment professionals to subordinate their own interests and place client interests first at all times.
An investment professional receives a gift worth $400 from a broker-dealer after a quarter of heavy trading. What is the most appropriate response?
Answer: Decline it to avoid any appearance of a conflict of interest
Gifts from broker-dealers can create real or perceived conflicts that compromise objectivity, so declining is the most prudent and ethical choice.
Which of the following constitutes a violation of the Standard of Care related to suitability under CIMA ethics?
Answer: Investing a client's emergency fund in an illiquid private equity vehicle
Investing emergency funds in illiquid assets directly violates suitability because it ignores the client's liquidity needs and time horizon.
A CIMA certificant discovers their firm has been misreporting performance data to prospects. What is the correct first step?
Answer: Raise the concern internally through appropriate compliance channels
CIMA ethics require addressing compliance concerns through internal channels first before escalating to external regulators.
Which concept best describes the obligation of a CIMA professional to keep client information confidential even after the advisory relationship ends?
Answer: Perpetual duty of confidentiality
The duty of confidentiality extends beyond the active client relationship and persists indefinitely for information obtained during the engagement.
When is it permissible for a CIMA professional to trade in a security ahead of a client's pending order in the same security?
Answer: It is never permissible; this constitutes front-running
Front-running — trading for personal benefit ahead of a known client order — is always prohibited as it breaches the duty of loyalty and fair dealing.
Which of the following is the primary purpose of establishing an Investment Policy Statement (IPS) from an ethical standpoint?
Answer: To document the client's goals, constraints, and risk tolerance for accountability
The IPS ethically obligates the advisor to manage the portfolio in alignment with the documented client objectives and constraints, ensuring accountability.