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Ethical and Professional Standards
1. Sumita Khatri wrote a research report and followed the necessary due diligence steps before sharing the report with her client. It turned out that there was a mistake in the report. This was pointed out by her client. Khatri apologized and re-submitted the corrected report. Did Khatri violate any CFA Institute Standards?
A. No.
B. Yes, relating to performance presentation.
C. Yes, relating to misconduct.
2. Aryana Reid, CFA, is a private wealth manager. She writes a popular blog, Aryana’s Investments, which has thousands of subscribers. The purpose of the blog is to attract new clients; each blog post is emailed to subscribers. The blog posts usually analyze her investment recommendations and actions in detail.
Recently, Reid posted a recommendation to sell shares of Jubilant. However, a few days after posting the initial recommendation, she decided to change the recommendation from sell to buy based on some new information.
In order to comply with CFA Institute standards, which of the following is the most appropriate method for posting a change in an investment recommendation?
A. Publish the post and send it as a mail to the blog subscribers.
B. Publish the post, send a mail to blog subscribers and email her clients simultaneously.
C. Email her clients first.
3. Kent Miller is an investment advisor at UBN Investments and is registered to take the CFA Level 1 exam. He meets with Carrie Hartford, a new client of the firm who has just moved her account from Northern Investment Bank. She tells Miller that she has read about derivatives and wants to invest in them. Miller explains the upside potential and downside risk of some of the derivative strategies and recommends protective puts for her portfolio.
In order to meet the standards of the Chartered Financial Analysts Institute, Miller should:
A. determine Hartford’s needs, objectives, and tolerance for risk before making a recommendation.
B. explain to Hartford in detail about the characteristics of his firm and the investment vehicles it offers, including the nature of the industry.
C. explain to Hartford his recent candidacy in the CFA Program, and its importance within the investment community.