180 BY ACCESSING THIS MOCK EXAM, YOU AGREE TO THE FOLLOWING TERMS OF USE

55-60 GIPS 18 Total: 180 By accessing this mock exam, you agree to the following terms of use: This mock exam is provided to currently-registered CFA candidates. Candidates may view and print the exam for personal exam preparation only. The following activities are strictly prohibited and may result in disciplinary and/or legal action: accessing or permitting access by anyone other than currently-registered CFA candidates; copying, posting to any website, emailing, distributing and/or reprinting the mock exam for any purpose. Vision 2020 Case Scenario Vision 2020 Capital Partners (V2020) has operated for the last ten years originating and brokering corporate finance deals through private placements in emerging and frontier markets. Due to the global financial crisis, investment banking deals have declined and V2020 has struggled to generate enough fees to sustain its business. The board of directors of V2020, (“the board”) made up of corporate finance experts, has identified opportunities to generate a new revenue stream. One such opportunity is the creation of a division to manage an Emerging and Frontier Market Balanced Fund (“the Fund”). The board has had several inquiries from clients asking for such a product. The board feels the Fund is an ideal business line to meet client demand, and create monthly asset management fees. The board thinks the Fund should also be required to act as a buyer of last resort for all its corporate finance client’s private placements. It believes this arrangement would act as a major incentive for private businesses to use their corporate finance services, thereby increasing revenues from their primary business activity. Since none of the V2020 board members or senior managers are experienced in asset management, the board hires Lauren Akinyi, CFA, an independent consultant who works with various clients in the asset management industry. She is asked to undertake a study on an appropriate structure for the Fund to meet both corporate finance and Fund client needs. She is also asked to help V2020 set up policies and procedures for the new Fund to make certain that all capital market regulations have been followed. The board informs her that the policies and procedures should also ensure compliance with the CFA

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Asset Manager Code of Professional Conduct. Akinyi subsequently makes the following recommendations in a report to the Board concerning compliance with the CFA Asset Manager Code: Recommendation 1: V2020 should abide by the following principles of conduct: Principle 1: act with skill, competence and diligence; Principle 2: act with independence and objectivity; and Principle 3: respond to all client inquiries. Recommendation 2: To take advantage of their vast business experience, the board of directors should implement new policies. Specifically, the board should: Policy 1: Take an active daily role in managing the Fund’s assets; Policy 2: Designate an existing employee as a compliance officer; and Policy 3: Disclose any conflicts of interest arising from their business interests. Recommendation 3: To avoid any conflicts of interest between the investment banking business and the new fund management business, a separate wholly owned subsidiary should be created to undertake the fund management business. The Fund would then provide a 100% guarantee to buy the private placements of the corporate finance clients without having to disclose to all clients the relationship between the two entities. Recommendation 4: To ensure timely and efficient trades in each of the markets the Fund invests in, only one stockbroker in each market should be utilized. The board should also consider buying an equity stake in each of the appointed brokers as an added profit opportunity. After the Fund completes its first year of operations, V2020 receives a letter from its regulator. The notification imposes fines for poor disclosures to its Fund clients and mandates the replacement of the senior fund manager as a condition for the renewal of V2020’s asset management license. The board challenges the ruling stating the Fund made the necessary full disclosures. Not wanting to incur expensive legal fees or waste precious time, the board, without admitting or denying fault, settles out of court paying a fine. Subsequently, the senior fund manager is terminated but receives a multi-million dollar bonus upon leaving. After the replacement of the senior fund manager, the license is renewed for a further year. The regulatory body however gives a warning that if the Fund has any future violations their license will be permanently revoked. Subsequently, the Fund discloses to its clients that the regulator has renewed its license for one year after the termination of the senior fund manager, a condition of the renewal. They also disclose the settlement out of court and the fine paid.