46. Jessica Morales works as an investment adviser for Chris Crosby, a middleaged, risk-averse investor. As per the investment policy statement, Morales invests in low-risk, high-income equities for Crosby keeping in mind his current needs and objectives. Recently Crosby‟s mother passed away leaving him with a significant inheritance. Morales continues to invest as before without any change in the investment strategy. According to the CFA Institute Standards of Professional Conduct, Morales should:
stay abreast of changes in the client‟s net worth and accordingly update the
investment policy to reflect changes in investment objectives.
consider the long term aspect of Morales‟ investments and continue with the
keep changing the asset allocations in line with market changes.
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47. Christie Tania, CFA, works as a fixed income manager for Mastermind Invest Capital. She finds an error in the performance results of one of her accounts as the report is about to be released to the client. The correction of the error will show an underperformance of the account compared to the selected benchmark. The client is not satisfied with Mastermind and had previously indicated that the account will be terminated if it did not meet the requisite returns. According to the CFA Institute Standards, Tania should:
not send the report and wait till the account shows an improvement in results.
inform the appropriate individuals that the report needs to be updated before
releasing it to the client.
not correct the error and send it.
48. Bernhard Investment and Brokerage Company, has recently changed its stock selection method based on fundamental analysis to technical analysis. After testing it in-house under various scenarios, the new method seems more appropriate to the investments done by Bernhard. Kurt Ludwig, CFA, a portfolio manager with Bernhard feels that his clients will not understand the change and decides not to inform them. The most appropriate action Ludwig should take to avoid a violation of the Code and Standards is:
to communicate the change of method to his clients and prospective clients.
to communicate with only those clients who have previous knowledge of
not to inform of the change because it might lead the clients to challenge the
the new method of stock selection.
49. Dave Daisuke, CFA, works in the corporate finance department of Advile Securities. He receives a non-cash compensation for every referral he makes to the brokerage department. This arrangement is an accepted norm within the company but the clients are not informed because no cash is given out within the firm for interdepartmental referrals. According to the CFA Institute Standards, the most appropriate action to take for the firm to avoid a violation is to:
adjust the non-cash compensation in the salaries of the personnel including
Daisuke who are referring clients to the brokerage department.
disclose to clients at the time of a referral, the referral arrangements within
stop the referral policy to remove any conflicts of interest.
50. Lauren Crawley is enrolled to take the Level I exam. As he tries hard to remember a formula to complete a question, he notices that the person in front of him gets up to drink water and a piece of paper slips from his pocket and falls on Crawley‟s table. In order to avoid a violation of the CFA Institute Standards of Professional Conduct, the least appropriate action taken by Crawley is to:
remove it without looking at it and call the proctor.
immediately call the proctor to her table and have the paper removed.
look at the paper and then remove it before anyone else notices it.
UGC NET PAPER 1
UGC NET Management
UGC NET COMPUTER SCIENCE
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CFA Level 1
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