Questions 7-12 relate to Ethical and Professional Standards.
Stephanie Mackley is a portfolio manager for Durango Wealth Management (DWM), a
regional money manager catering to wealthy investors in the southwestern portion of the
United States. Mackley's clients vary widely in terms of their age, net worth, and investment
objectives, but all must have at least $1 million in net assets before she will accept them as
clients.
Many of Mackley's clients are referred to her by Kern & Associates, an accounting and
consulting firm. DWM does not provide any direct compensation to Kern & Associates for
the referrals, but Mackley, who is the president of her local CFA Society, invites Kern &
Associates to give an annual presentation to the society on the subject of tax planning and
minimization strategies that Kern & Associates provides for its clients. Kern & Associates'
competitors have never received an invitation to present their services to the society. When
Mackley receives a referral, she informs the prospect of the arrangement between DWM and
Kern & Associates.
DWM maintains a full research staff that analyzes and recommends equity and debt
investments. All of the in-house research is provided to the firm's portfolio managers and
their clients. In addition, DWM provides a subscription service to outside investors and
portfolio managers. Aaron Welch, CFA, a private contractor, researches and reports on high-
tech firms in the United States and other developed countries for several portfolio
management clients. One of his latest reports rated InnerTech, Inc., a small startup that
develops microscopic surgical devices, as a strong buy. After reviewing the report carefully,
Mackley decides to purchase shares of InnerTech for clients with account values over $6
million. After careful review of each client, she determines that accounts with less than this
amount cannot accept the risk level associated with InnerTech stock.
Two days after purchasing InnerTech for her clients, the stock nearly doubles in value, and
the clients are ecstatic about the returns on their portfolios. Several of them give her small
bouquets of flowers and boxes of chocolates, which she discloses to her supervisor at DWM.
One client even offers her the use of a condo in Vail, Colorado, for two weeks during ski
season if she can reproduce the results next quarter. Mackley graciously thanks her clients
and asks that they refer any of their friends and relatives who are in need of asset
management services. She provides brochures to a few clients who mention they have friends
who would be interested. The brochure contains a description of Mackley's services and her
qualifications. At the end of the brochure, Mackley includes her full name followed by "a
Chartered Financial Analyst" in bold font of the same size as her name. Following is an
excerpt from the brochure:
"DWM can provide many of the investment services you are likely to need. For those
services that we do not provide directly, such as estate planning, we have standing
relationships with companies that do provide such services. I have a long history with DWM,
serving as an investment analyst for six years and then in my current capacity as a portfolio
manager for 12 years. My clients have been very satisfied with my past performance and will
likely be satisfied with my future performance, which I attribute to my significant investment
experience as well as my participation in the CFA Program. I earned the right to use the CFA
designation thirteen years ago. All CFA charterholders must pass a series of three rigorous
examinations that cover investment management and research analysis."
Two weeks later, some of Mackley's clients request that she provide supporting
documentation for the research report on InnerTech so they can familiarize themselves with
how DWM analyzes investment opportunities. Mackley asks Welch for the documents, but
Welch is unable to provide copies of his supporting research since he disposed of them,
according to the company's policy, one week after issuing and distributing the report.
Mackley informs Welch that obtaining the supporting documents is of the utmost importance
because of one of the clients requesting the materials. She explains that Craig Adams is about
to inherit $20 million and, as a result, will be one of the firm's most important clients. Welch
agrees to recreate the research documents in order to support the firm's relationship with
Adams.
...
Does the arrangement between Mackley and Kern & Associates violate any CFA Institute
Standards of Professional Conduct?
A) Yes.
B) No, because the referral agreement is fully disclosed to all clients and prospects before they
employ Mackley's services.
C) No, because Mackley only accepts clients with net assets above $1 million who are likely to know
that the arrangement is common in the industry.
Question #8 of 60
Were any CFA Institute Standards of Professional Conduct violated in conjunction with
Welch's report on InnerTech and Mackley's initial purchase of InnerTech stock?
Welch Mackley
A) No Yes
B) Yes No
C) Yes Yes
Question #9 of 60
According to the Standards of Professional Conduct, Mackley must do which of the
following regarding the gifts offered to her by her clients? She may:
A) not accept use of the condo without prior disclosure to her employer in writing.
B) not accept the gifts or use of the condo without disclosing them to her employer in writing.
C) accept the gifts and use of the condo as they represent little or no monetary value to her or cost
to her clients.
Question #10 of 60
Does Mackley's signature at the end of her brochure violate any CFA Institute Standards of
Professional Conduct?
A) Yes. Including "a Chartered Financial Analyst" after her name is a violation.
B) No. Although writing out "a Chartered Financial Analyst" is discouraged, doing so does not
represent a violation.
C) Yes. Mackley may include "a Chartered Financial Analyst" in bold type only if the rest of her name
is also in bold type.
Question #11 of 60
In her marketing brochure, did Mackley violate any CFA Institute Standards of Professional
Conduct in her reference to her past and future investment performance or her description of
the CFA Program?
Performance CFA Program
A) Yes Yes
B) No Yes
C) Yes No
Question #12 of 60
In her discussions with Welch, where she asks him to recreate the supporting research for the
InnerTech report, has Mackley violated any CFA Institute Standards of Professional
Conduct?
A) No.
B) Yes, because the request creates a conflict of interest between Mackley and Welch.
C) Yes, because she failed to preserve the confidentiality of her client's information.
Question #13 of 60
Bạn đang xem questions 7- - CFA 2018 LEVEL 3 SCHWESER PRACTICE EXAM V2 EXAM 3 AFTERNOON