p.1
Code of Ethics Overview
What is the purpose of the Code of Ethics?
To promote the integrity and professionalism of members and candidates.
What should Members and Candidates do in the event of a conflict between laws, rules, or regulations?
Comply with the more strict law, rule, or regulation.
p.43
Investment Analysis, Recommendations and Actions
What is the purpose of record retention in investment analysis?
To support investment analyses, recommendations, actions, and communications with clients and prospective clients.
What must Members and Candidates ensure when communicating investment performance information?
That it is fair, accurate, and complete.
p.1
Integrity of Capital Markets
What is a key principle outlined in the Code of Ethics?
Act with integrity, competence, diligence, respect, and in an ethical manner.
p.48
Conflicts of Interest
What should be done to isolate members providing investment services who also serve as directors?
They should be isolated from those making investment decisions by firewalls or similar restrictions.
p.1
Responsibilities as CFA Institute Members
Who is expected to adhere to the Code of Ethics and Standards of Professional Conduct?
All members and candidates of the CFA Institute.
What does Standard IV address regarding financial incentives?
Additional Compensation Arrangements.
What should members and candidates avoid disclosing?
Any information received from a client, except to authorized fellow employees working for the client.
p.53
Responsibilities as CFA Institute Members
What is Standard VII focused on?
Responsibilities as a CFA Institute Member or CFA Candidate.
What is the first standard under Professionalism?
Standard I: Professionalism.
p.48
Conflicts of Interest
What must members and candidates disclose regarding their investments?
Any beneficial ownership interest in securities or other investments they recommend.
What responsibilities are highlighted for those in supervisory roles under Standard IV?
Responsibilities of Supervisors.
p.54
Responsibilities as CFA Institute Members
What is the impact of compromising conduct on CFA Institute programs?
It affects the integrity, validity, or security of CFA Institute programs.
p.44
Investment Analysis, Recommendations and Actions
What must members and candidates archive to support their investment-related communications?
Research notes and other documents, either electronically or in hard copy.
p.56
Responsibilities as CFA Institute Members
What should CFA Institute members and candidates disseminate to their firm's departments?
Written information about Standard VII(B) and its guidance.
What should members and candidates prepare regarding their qualifications?
A summary of their qualifications and experience.
What is the primary duty of Members and Candidates to their employers?
To act for the benefit of their employer.
p.4
Standards of Professional Conduct
What does Standard II focus on?
Integrity of Capital Markets.
p.59
Global Investment Performance Standards (GIPS)
What should firms do when GIPS standards conflict with laws or regulations?
Firms must comply with the law or regulations and disclose the conflict in the GIPS Report.
p.3
Code of Ethics Overview
What is the primary responsibility outlined in the Code of Ethics?
To practice and encourage others to practice in a professional and ethical manner.
What is prohibited for Members and Candidates regarding violations of laws, rules, or regulations?
They must not knowingly participate or assist in violations and must dissociate from them.
What must members and candidates achieve and maintain in their professional activities?
Independence and objectivity.
p.46
Conflicts of Interest
How should disclosures of conflicts be presented?
They must be prominent, delivered in plain language, and communicate relevant information effectively.
p.16
Integrity of Capital Markets
What must members and candidates avoid to maintain the integrity of capital markets?
Engaging in practices that distort prices or artificially inflate trading volume.
p.55
Responsibilities as CFA Institute Members
What should Members and Candidates be cautious about when discussing the CFA designation?
They should not misrepresent or exaggerate its implications.
What is the primary duty of Members and Candidates to their clients?
Loyalty, Prudence, and Care.
p.66
Global Investment Performance Standards (GIPS)
What must verifiers determine regarding a firm in relation to GIPS standards?
If the firm satisfies the GIPS standards requirements for recordkeeping, policies, procedures, and other criteria.
p.39
Investment Analysis, Recommendations and Actions
What should be developed for analysts and review committees regarding due diligence procedures?
Detailed, written guidance that establishes the procedures for judging the adequacy of recommendations.
What must members and candidates comply with when treating clients fairly?
Their firm's compliance procedures.
What should members and candidates do to protect vulnerable investors?
They should comply with firm policies and procedures specifically dealing with vulnerable clients.
p.59
Global Investment Performance Standards (GIPS)
How is a 'firm' defined in the context of GIPS?
A firm is an investment firm, subsidiary, or division held out to the public as a distinct business entity.
p.61
Global Investment Performance Standards (GIPS)
What do the GIPS standards mandate regarding calculation methodologies?
They mandate the use of certain methodologies to facilitate comparability of results among firms.
What must members and candidates do if a client engages in illegal activities?
They may disclose the information despite the confidentiality obligation.
What should members and candidates limit when providing investment recommendations?
The number of people involved.
p.57
Global Investment Performance Standards (GIPS)
What is the primary purpose of GIPS?
To ensure fair representation and full disclosure of investment performance.
What should members do when concerns about vulnerable clients are raised?
Follow internal firm reporting procedures.
p.61
Global Investment Performance Standards (GIPS)
What must not be done with returns for periods of less than one year according to GIPS?
They must not be annualized.
p.64
Global Investment Performance Standards (GIPS)
What information about portfolios must be included in GIPS Composite Reports?
The number of portfolios (if six or more) in the composite at each period end.
What is a key responsibility regarding client information?
Maintain confidentiality.
p.51
Conflicts of Interest
What must members and candidates disclose regarding referral fees?
Any compensation, consideration, or benefit received from or paid to others for the recommendation of products or services.
What must members and candidates disclose to their employer?
Any compensation they propose to receive for services in addition to their employer's compensation.
What does Standard III: Duties to Clients emphasize regarding investment actions?
Investment actions must align with the specific mandate, strategy, or style of the portfolio.
p.46
Conflicts of Interest
What must Members and Candidates disclose according to Standard VI?
All matters that could impair their independence and objectivity or interfere with their duties.
What should be done if there are changes in a client's circumstances?
Reflect those changes in an updated investment policy statement (IPS).
What must members and candidates not accept in relation to their employer's interests?
Gifts, benefits, compensation, or consideration that competes with or creates a conflict of interest.
p.46
Conflicts of Interest
What is the purpose of disclosing conflicts of interest?
To maintain independence and objectivity in duties to clients and employers.
What is required for compliance practices?
Comply with firm policies.
p.47
Conflicts of Interest
What should members and candidates do to ensure conflicts are effectively communicated?
Err on the side of caution.
What is a requirement for members and candidates who publish a webpage?
They should regularly monitor materials to ensure current information.
p.13
Integrity of Capital Markets
What is market manipulation?
The act of artificially inflating or deflating the price of a security to mislead investors.
p.39
Investment Analysis, Recommendations and Actions
What type of criteria should be developed to assess research quality?
Measurable criteria for assessing the quality of research and the accuracy of recommendations over time.
What is one duty to clients regarding decision and dissemination?
Shorten the time frame between decision and dissemination.
p.4
Standards of Professional Conduct
What is the main concern of Standard V?
Investment Analysis, Recommendations, and Actions.
p.47
Conflicts of Interest
What must members and candidates determine regarding conflicts of interest?
Whether a conflict of interest exists.
p.60
Global Investment Performance Standards (GIPS)
What is a composite in GIPS?
An aggregation of one or more portfolios managed according to a similar investment mandate, objective, or strategy.
What should members and candidates be aware of regarding whistle-blowing?
Their firm’s policies related to whistle-blowing and encourage adoption of industry best practices.
What is a benefit of studying for professional certifications?
It helps maintain necessary competence.
What is required regarding the separation of client assets?
Client’s assets must be separated from any other party’s assets, including the member's or candidate's own assets.
p.58
Global Investment Performance Standards (GIPS)
What type of regulation does GIPS promote?
Industry self-regulation on a global basis.
p.64
Global Investment Performance Standards (GIPS)
What standard deviation information must be included in GIPS Composite Reports?
The three-year annualized ex post standard deviation of the composite and of the benchmark as of each annual period end.
What must Members and Candidates understand and comply with according to Standard I: Professionalism?
All applicable laws, rules, and regulations governing their professional activities.
Who should members disclose additional compensation to?
Their supervisor or compliance officer.
p.42
Investment Analysis, Recommendations and Actions
What should members or candidates be able to provide if asked by a client?
Additional information covering factors not included in the report.
p.14
Integrity of Capital Markets
How is information classified as 'material'?
If its disclosure would probably impact the price of a security or if reasonable investors would want to know it before making an investment decision.
What should members and candidates discuss with clients?
The appropriate methods for providing confidential information.
What must members and candidates avoid in their professional conduct?
Dishonesty, fraud, or deceit.
p.16
Integrity of Capital Markets
What does transaction-based manipulation involve?
Actions that a member or candidate knew or should have known could affect the pricing of a security.
What should be considered when taking actions on behalf of clients?
All available information.
What is the consequence of causing harm to their employer?
It violates the duty of loyalty.
p.15
Integrity of Capital Markets
What must members adhere to regarding their firm's policies?
Any firewall restrictions adopted by their firm.
p.65
Global Investment Performance Standards (GIPS)
What does verification provide assurance on regarding a firm's performance?
It assures that the firm's policies and procedures related to composite and pooled fund maintenance comply with GIPS standards.
p.2
Code of Ethics Overview
What should members use when conducting investment analysis?
Reasonable care and independent professional judgment.
p.58
Global Investment Performance Standards (GIPS)
What does GIPS aim to ensure regarding data?
Accurate and consistent data.
p.57
Global Investment Performance Standards (GIPS)
What does GIPS promote in terms of investment performance?
Transparency and comparability across firms.
p.65
Global Investment Performance Standards (GIPS)
Why is documentation important for reported performance in a new firm?
It supports the reported performance and ensures compliance with GIPS.
p.62
Global Investment Performance Standards (GIPS)
What should be used for asset valuation if available on the measurement date?
Objective, observable, unadjusted quoted market prices for identical investments in active markets.
p.49
Conflicts of Interest
What is the priority of transactions according to Standard VI: Conflicts of Interest?
Investment transactions for clients and employers must have priority over transactions in which a Member or Candidate is the beneficial owner.
p.51
Conflicts of Interest
To whom must members and candidates disclose referral fees?
Their employer, clients, and prospective clients, as appropriate.
How does the Code of Ethics relate to the investment profession?
It sets the ethical standards that guide professional conduct.
p.44
Investment Analysis, Recommendations and Actions
Who is primarily responsible for maintaining records that support investment actions?
The firm, rather than individuals.
What should members and candidates not offer, solicit, or accept?
Any gift, benefit, compensation, or consideration that could compromise independence and objectivity.
p.14
Integrity of Capital Markets
What defines 'non-public' information?
Information that has not been disseminated or is not available to the marketplace in general.
p.38
Investment Analysis, Recommendations and Actions
What must members and candidates have to support their investment analysis and recommendations?
A reasonable and adequate basis, supported by appropriate research and investigation.
p.16
Integrity of Capital Markets
What is an example of information-based manipulation?
Spreading false rumors to induce trading by others.
What is emphasized in Standard I B?
Independence and Objectivity.
p.55
Responsibilities as CFA Institute Members
What is the standard regarding the representation of candidacy in the CFA Program?
Members and Candidates must not misrepresent or exaggerate their candidacy.
p.37
Investment Analysis, Recommendations and Actions
What does Standard V.A emphasize?
Diligence and Reasonable Basis.
p.52
Conflicts of Interest
What type of programs should members and candidates participate in concerning referral fees?
Approved referral fee programs.
p.52
Conflicts of Interest
What information should be included in the updates provided to employers regarding referral fees?
The amount and nature of compensation received through referral fee arrangements.
What type of personal behavior is not tolerated in the investment industry?
Behavior that reflects poorly on the individual, institution, or industry.
p.62
Global Investment Performance Standards (GIPS)
What must be included in all total return calculations according to GIPS?
Returns from cash and cash equivalents.
What must be disclosed to clients regarding asset maintenance?
Where the assets are maintained and any changes in location or timing.
p.58
Global Investment Performance Standards (GIPS)
What is the goal of GIPS in terms of performance standards?
Obtain worldwide acceptance of a single standard for calculating and presenting performance.
What types of events can members attend for professional development?
Conferences, seminars, or webinars.
What must Members and Candidates ensure when managing a portfolio?
They must make investment recommendations or take actions consistent with the stated objectives and constraints of the portfolio.
What must members and candidates understand regarding their firm's procedures?
They must understand and follow their firm’s electronic information communication and storage procedures.
p.45
Conflicts of Interest
What is covered under Section B of Standard VI?
Priority of Transactions.
What must Members and Candidates do before making investment recommendations?
Make a reasonable inquiry into a client’s investment experience, risk and return objectives, and financial constraints.
p.52
Conflicts of Interest
What should members and candidates encourage their employers to develop regarding referral fees?
Procedures related to referral fees.
What should members and candidates list in addition to their qualifications?
The services they are capable of performing.
p.40
Investment Analysis, Recommendations and Actions
What should be included in the criteria for assessing outside providers?
Quality of information, reasonableness and adequacy of collection practices, and accuracy of information.
What is the primary duty of members and candidates regarding client information?
To keep information about current, former, and prospective clients confidential.
What type of information must Members and Candidates not divulge?
Confidential information.
What must Members and Candidates exercise when acting for their clients?
Reasonable care and prudent judgment.
Under what circumstances can confidential client information be disclosed?
1. If it concerns illegal activities, 2. If disclosure is required by law, or 3. If the client permits it.
In what context should the suitability of investments be judged?
In the context of the client’s total portfolio.
p.2
Code of Ethics Overview
Whose interests must CFA members prioritize?
The integrity of the investment profession and the interests of clients.
What termination policies should members and candidates clearly understand?
Policies related to the resignation process, client and staff disclosure, and social media updates.
p.4
Standards of Professional Conduct
What is the focus of Standard VII?
Responsibilities as a CFA Institute Member or CFA Candidate.
What should firms maintain regarding their clients?
A list of clients and their holdings.
p.62
Global Investment Performance Standards (GIPS)
How must returns be calculated under GIPS?
After the deduction of transaction costs.
p.60
Global Investment Performance Standards (GIPS)
What types of accounts must be included in at least one composite?
All discretionary, fee-paying, segregated accounts.
How should terminated accounts be treated in performance history?
They should be included with a clear indication of when they were terminated.
What systematic process should be established for accounts?
Systematic account review.
p.62
Global Investment Performance Standards (GIPS)
What is the second alternative for asset valuation under GIPS?
Quoted prices for identical or similar investments in markets that are not active.
p.42
Investment Analysis, Recommendations and Actions
What should members and candidates encourage their firms to have regarding research?
A rigorous methodology for reviewing research created for publication and dissemination to clients.
What should be included in a written investment policy statement (IPS)?
The needs and circumstances of each client and the client's investment objectives.
p.3
Code of Ethics Overview
What should professionals promote according to the Code of Ethics?
The integrity and viability of the global capital markets.
What types of compensation must be disclosed?
Performance incentives offered by clients and any other additional compensation.
p.63
Global Investment Performance Standards (GIPS)
Can firms link simulated or model portfolio performance with actual performance?
No, firms may not link the theoretical performance of simulated or model portfolios with actual performance.
p.50
Conflicts of Interest
What should members and candidates urge their firms to establish?
Policies and procedures to prevent potential conflicts of interest.
p.13
Integrity of Capital Markets
What is considered material non-public information?
Information that could influence an investor's decision and is not publicly available.
What is one step to take when establishing an account for a vulnerable investor?
Ask for a secondary contact.
What must members and candidates understand about offering services outside their firm?
Any restrictions placed by the employer on offering similar services while employed.
What does Performance Presentation refer to in Standard III?
The accurate and honest representation of investment performance.
What must be included in the itemized statement provided to clients?
Funds and securities in custody, debits, credits, and transactions during the period.
What is the importance of Preservation of Confidentiality in Standard III?
To protect client information from unauthorized disclosure.
p.41
Investment Analysis, Recommendations and Actions
What is required when identifying factors important to investment analyses?
Use reasonable judgment and include those factors in communications with clients.
Who should determine the voting of shares and proxies?
The authorized individual on behalf of clients.
p.60
Global Investment Performance Standards (GIPS)
What must firms include in any composite for which they meet the composite definition?
All discretionary, fee-paying pooled funds.
What is an informal way to engage in continuing education?
Through outside reading of subject matter articles and publications.
p.1
Standards of Professional Conduct
What do the Standards of Professional Conduct aim to establish?
A framework for ethical behavior and decision-making in the investment profession.
p.48
Conflicts of Interest
What must members and candidates do when faced with potential conflicts of interest?
Resolve the situations or disclose them according to Standard VI(A).
p.43
Investment Analysis, Recommendations and Actions
What must members and candidates develop and maintain according to Standard V?
Appropriate records to support their investment analyses, recommendations, actions, and communications.
p.54
Responsibilities as CFA Institute Members
What must CFA Institute Members and Candidates avoid to maintain integrity?
Engaging in conduct that compromises the reputation or integrity of CFA Institute or the CFA designation.
p.42
Investment Analysis, Recommendations and Actions
What must members or candidates maintain regarding their research?
Records indicating the nature of the research.
What is the main focus of Standard I: Professionalism?
To avoid plagiarism in preparing research reports or conclusions of analysis.
p.14
Integrity of Capital Markets
What must members and candidates do with material non-public information?
They must not act or cause others to act on the information.
p.3
Code of Ethics Overview
What is emphasized regarding professional competence in the Code of Ethics?
To maintain and improve their professional competence and that of other investment professionals.
p.63
Global Investment Performance Standards (GIPS)
What must a firm have regarding discretion according to GIPS?
A clear, written definition of discretion that is consistently applied.
p.38
Investment Analysis, Recommendations and Actions
What is the primary requirement for members and candidates under Standard V regarding investment analysis?
To exercise diligence, independence, and thoroughness.
p.53
Responsibilities as CFA Institute Members
What does Standard VII A address?
Conduct as Participants in CFA Institute Programs.
What is required before accepting additional compensation arrangements?
Written consent from all parties involved.
p.53
Responsibilities as CFA Institute Members
What does Standard VII B pertain to?
Reference to CFA Institute, the CFA Designation, and the CFA Program.
p.39
Investment Analysis, Recommendations and Actions
What is required for research reports, credit ratings, and investment recommendations according to Standard V?
They must have a basis that can be substantiated as reasonable and adequate.
What does Standard IV: Duties to Employers address?
Additional Compensation Arrangements.
What is the primary obligation of members and candidates under Standard III: Duties to Clients?
To deal fairly and objectively with all clients.
What must members and candidates ensure regarding those they supervise?
They must make reasonable efforts to ensure compliance with applicable laws, rules, regulations, and the Code and Standards.
Who should professionals seek advice from regarding legal requirements?
Compliance personnel or legal counsel.
What is the primary principle under Standard III: Duties to Clients?
Loyalty, Prudence, and Care.
p.40
Investment Analysis, Recommendations and Actions
What is the goal of adopting a standardized set of criteria for external advisers?
To evaluate the adequacy of external advisers.
What must be determined about an investment before making a recommendation?
It must be suitable to the client’s financial situation and consistent with their written objectives, mandates, and constraints.
p.16
Integrity of Capital Markets
What must members and candidates comply with to prevent manipulative trading?
Their firm’s policies and procedures.
p.66
Global Investment Performance Standards (GIPS)
What aspects do verifiers assess for compliance with GIPS standards?
Recordkeeping, policies and procedures, definition of the firm, completeness of composites list, and calculation of total firm assets.
p.57
Global Investment Performance Standards (GIPS)
What do the Global Investment Performance Standards (GIPS) aim to achieve?
To provide a standardized approach to investment performance reporting.
Which code must Members and Candidates comply with alongside applicable laws?
The CFA Institute Code of Ethics and Standards of Professional Conduct.
What must professionals comply with regarding client suitability?
Their firm's policies and procedures relating to suitability.
p.13
Integrity of Capital Markets
What does Standard II of the CFA Code of Ethics focus on?
Integrity of Capital Markets.
p.37
Investment Analysis, Recommendations and Actions
What is the focus of Standard V in the CFA Code of Ethics?
Investment Analysis, Recommendations, and Actions.
What should members and candidates restrict regarding special arrangements?
Special cost arrangements.
p.56
Responsibilities as CFA Institute Members
What should members and candidates encourage their firms to create?
Templates approved by a central authority consistent with Standard VII(B).
p.37
Investment Analysis, Recommendations and Actions
What is the key aspect of Standard V.B?
Communication with Clients and Prospective Clients.
Whose interests must Members and Candidates prioritize?
Their clients' interests over their employer's or their own interests.
p.50
Conflicts of Interest
Why is it important to prevent the appearance of a conflict of interest?
To maintain trust and integrity in professional relationships.
p.65
Global Investment Performance Standards (GIPS)
What conditions allow past performance from a previous firm to be linked to a new or acquiring firm?
1) Substantially all investment decision makers are employed by the new firm, 2) the decision-making process remains intact, 3) the new firm has supporting records, and 4) there is no break in the track record.
What type of training should members undertake regarding vulnerable investors?
Training and education to understand issues related to vulnerable investors.
p.65
Global Investment Performance Standards (GIPS)
What aspects of performance does verification cover?
Calculation, presentation, and distribution of performance.
p.60
Global Investment Performance Standards (GIPS)
How is the composite return calculated?
It is the weighted average of the return of all portfolios in the composite.
p.64
Global Investment Performance Standards (GIPS)
What measure of performance dispersion is required in GIPS Composite Reports?
A measure of internal dispersion of individual portfolio returns for each annual period.
p.62
Global Investment Performance Standards (GIPS)
What is the last resort for asset valuation under GIPS?
Subjective, unobservable inputs.
p.54
Responsibilities as CFA Institute Members
What is Standard VII focused on?
Responsibilities as a CFA Institute Member or CFA Candidate.
p.44
Investment Analysis, Recommendations and Actions
What is the standard that governs investment analysis and recommendations?
Standard V: Investment Analysis, Recommendations, and Actions.
p.40
Investment Analysis, Recommendations and Actions
What is the purpose of developing measurable criteria for assessing outside providers?
To evaluate the quality of information, collection practices, and accuracy over time.
p.56
Responsibilities as CFA Institute Members
Which departments should receive information about Standard VII(B)?
Legal, compliance, public relations, and marketing departments.
What must Members and Candidates avoid doing in relation to their employer?
Depriving their employer of the advantage of their skills and abilities.
p.50
Conflicts of Interest
What is important to disclose to clients and prospective clients?
The policies established to prevent conflicts of interest.
What is the first duty to clients according to Standard III?
Establish the investment objectives of the client.
What are members and candidates encouraged to recommend to their employers?
To adopt a code of ethics.
What should professionals do regarding illegal activities?
Dissociate from illegal activities.
What should members and candidates fully understand regarding their employer's policies?
They should ensure that these policies do not conflict with the Code and Standards.
p.41
Investment Analysis, Recommendations and Actions
What should members and candidates do if there are changes in their investment processes?
Promptly disclose any changes that might materially affect those processes.
What should firms encourage regarding GIPS standards?
Firms should encourage compliance with GIPS standards.
Can a member disclose client information if the client gives permission?
Yes, if the client permits disclosure, it is allowed.
What should be developed and documented for trade allocation?
Trade allocation procedures.
p.64
Global Investment Performance Standards (GIPS)
What asset-related information is required in GIPS Composite Reports?
The amount of assets in the composite and the amount of total firm assets at the end of each period.
p.60
Global Investment Performance Standards (GIPS)
What must firms do regarding external cash flows in composites?
Firms must formulate, document, and adhere to composite- and pooled fund-specific policies for the treatment of external cash flows.
p.55
Responsibilities as CFA Institute Members
What must CFA Institute Members and Candidates avoid when referring to CFA Institute?
They must not misrepresent or exaggerate the meaning or implications of membership.
What is required for performance presentation under Standard III?
Members and Candidates must make reasonable efforts.
p.38
Investment Analysis, Recommendations and Actions
What does Standard V emphasize about the nature of investment recommendations?
They must be based on thorough analysis and reasonable basis.
p.59
Global Investment Performance Standards (GIPS)
What are the required fundamentals of compliance with GIPS standards?
Properly defining the firm, providing GIPS Reports to all prospective clients/investors, adhering to applicable laws and regulations, and ensuring information presented is not false or misleading.
p.50
Conflicts of Interest
What must members and candidates comply with regarding personal investing?
Their employer’s personal investing policies.
p.2
Code of Ethics Overview
What must members of CFA Institute act with?
Integrity, competence, diligence, respect, and in an ethical manner.
What is the focus of the Suitability principle in Standard III?
Ensuring that investment recommendations are appropriate for clients.
p.58
Global Investment Performance Standards (GIPS)
Who may claim compliance with the GIPS Standards?
Only investment management firms and asset owners that manage assets on a discretionary basis and compete for business.
p.15
Integrity of Capital Markets
What must members comply with regarding personal trading?
Their employers’ restrictions or prohibitions on personal trading by employees.
p.61
Global Investment Performance Standards (GIPS)
Under what conditions can money-weighted returns be presented instead of time-weighted returns?
If the firm controls external cash flows and at least one specific condition is met regarding the portfolio's structure.
p.57
Global Investment Performance Standards (GIPS)
What is a key requirement for firms under GIPS?
Firms must calculate performance in a consistent manner.
What type of performance should be presented in a performance presentation?
The performance of the weighted composite of similar portfolios.
p.58
Global Investment Performance Standards (GIPS)
How does GIPS promote competition among investment firms?
By promoting fair, global competition.
How can members participate in training offered by their employer?
By regularly engaging in it.
What must be maintained regarding performance calculations?
The data and records used to calculate the performance being presented.
p.15
Integrity of Capital Markets
What should members encourage their firms to adopt?
Compliance procedures to prevent the misuse of material nonpublic information.
p.41
Investment Analysis, Recommendations and Actions
What must members and candidates disclose to clients regarding their investment processes?
The basic format and general principles of the investment processes they use.
p.57
Global Investment Performance Standards (GIPS)
Who is required to comply with GIPS?
All investment firms that present performance results to prospective clients.
What should be published to guide pre-dissemination behavior?
Guidelines for pre-dissemination behavior.
What is a recommended practice for information sharing?
Simultaneous dissemination.
p.58
Global Investment Performance Standards (GIPS)
What is one objective of the GIPS standards?
Promote investor interests and instill investor confidence.
What training should members receive for clients with diminished mental capacity?
Training on how to interact and address issues with such clients.
What is one way members can engage in professional development?
By regularly participating in a continuing education program.
What should be considered when addressing an audience in performance presentations?
The knowledge and sophistication of the audience.
What must be disclosed regarding compensation?
Compensation arrangements.
p.41
Investment Analysis, Recommendations and Actions
What must members and candidates distinguish in their investment analysis presentations?
Between fact and opinion.
What should be done if there are questionable matters regarding a client's account?
Disclose them in writing to the client and obtain client approval.
p.60
Global Investment Performance Standards (GIPS)
What defines a discretionary portfolio?
A portfolio is discretionary if the firm is able to implement the intended investment strategy.
Why is it important to become proficient with new skills or knowledge?
When professional responsibilities change.
p.66
Global Investment Performance Standards (GIPS)
Can a verification report be issued for part of a firm under GIPS?
No, it may only be issued with respect to the whole firm.
p.39
Investment Analysis, Recommendations and Actions
What is the purpose of establishing minimum levels of scenario testing?
To evaluate all computer-based models used in developing, rating, and evaluating financial instruments.
p.47
Conflicts of Interest
What must members and candidates disclose to clients?
Any known conflicts of their firm.
p.2
Code of Ethics Overview
Who are considered 'Members and Candidates' in the CFA context?
Members of CFA Institute and candidates for the CFA designation.
p.65
Global Investment Performance Standards (GIPS)
What is required for the decision-making process in a new firm to remain compliant with GIPS?
It must remain substantially intact and independent.
What additional measure should be implemented for the accounts of vulnerable investors?
Implement additional compliance review.
What must be disclosed regarding trade allocation?
Trade allocation procedures.
What must members and candidates follow in relation to client duties?
All legal requirements and applicable provisions of the Code and Standards.
p.60
Global Investment Performance Standards (GIPS)
Why is consistency important in the treatment of external cash flows?
To adhere to the documented policies consistently.
On what basis should investment recommendations be disseminated?
Based on indications of interest and suitability.
What does the duty of loyalty entail for Members and Candidates?
Acting for the benefit of their clients.
Is disclosure of client information allowed if required by law?
Yes, disclosure is permitted if required by law.
p.41
Investment Analysis, Recommendations and Actions
What significant information must be disclosed to clients and prospective clients?
Significant limitations and risks associated with the investment process.
p.64
Global Investment Performance Standards (GIPS)
What is the minimum number of years of annual performance required in GIPS Composite Reports?
At least five years, building to a minimum of 10 years of returns.
p.61
Global Investment Performance Standards (GIPS)
What are the four conditions under which money-weighted returns may be used?
1) Closed-end; 2) Fixed life; 3) Fixed commitment; 4) Illiquid investments as a significant part of the strategy.
p.64
Global Investment Performance Standards (GIPS)
What must GIPS Composite Reports include regarding annual returns?
Composite and benchmark annual returns for all years.
What disclosures should be included in performance results?
Disclosures that fully explain the performance results, including whether results are simulated, from a prior entity, or gross/net of fees.
What is the purpose of participating in expert groups or organizations?
To enhance professional competence.
p.62
Global Investment Performance Standards (GIPS)
What is the first alternative for asset valuation if quoted market prices are not available?
Quoted prices for similar investments in active markets.
p.62
Global Investment Performance Standards (GIPS)
What is the third alternative for asset valuation if previous options are not available?
Market-based inputs, other than quoted prices, that are observable for the investment.
