JUN18L1ETH/E07

Question 1
Jeff Taylor, a CFA candidate, feels that the curriculum offered by the CFA Institute does not cover advanced
mathematical concepts that are used in real business situations. He writes to the CFA director to include such
concepts in the curriculum. He also writes an article for a local business magazine about how the curriculum can be
revised and mentions the important topics that were not tested in his exam. Which of the following is least accurate?
a) Jeff has not violated the standards by contacting the director of the CFA Institute.
b) Jeff has not violated the standards by commenting about the CFA exam's curriculum and by suggesting
topics that can be included.
c) Jeff has not violated the standards by listing the topics that were not tested in his exam.
Jeff has violated Standard VII(A) by listing the topics that were not tested in the exam.

Question 2
Nick Austin has failed the CFA Level I exam three times and is registered for the exam for the fourth time. In his
frustration, Nick publicly posted the following comment on his social media account: “I believe that the CFA Institute is
limiting the percentage of passers so they can profit more from the exam fee!” Which is correct?
a) Austin is not in violation of Standard I (D) nor Standard VII (A).
b) Austin is in violation of Standard VII (A) but not in violation of Standard I (D).
c) Austin is in violation of both Standard I (D) and Standard VII (A).
The first choice is correct. As Nick is only expressing his opinions about the CFA Institute and did not involve in any
dishonest or fraudulent activities, he is not in violation of Standard VII (A) Conduct as Members and Candidates in the
CFA Program or Standard I (D) Misconduct.

Question 3
Whistleblowing can best be described as an act of:
a) disclosing confidential statutory business information of a firm.
b) exposing illegal activity in a firm.
c) making false public allegations of illegal activity in a firm.
Whistleblowing is an act of exposing any illegal activity in a firm.

Question 4
Which of the following is the correct usage of CFA marks?
a) Douglas Smith, CFA
b) Douglas Smith, Belgium-CFA
c) Douglas Smith, C.F.A
CFA designation should not be altered to create new designation by adding new word or phrase. There should be no
periods between the letters.

Question 5
Andrew Adams passed the CFA Level I exam before he graduated from university and got a job offer from a reputable
investment bank. Adams then posted on his social media blog how important the CFA program is for someone who
wants to be in the investment industry and shared some of the questions from his CFA exam. Adams most likely
violated the CFA Code of Ethics or Standards of Professional Conduct pertaining to:
a) Conduct as Members and Candidates in the CFA Program.
b) Reference to CFA Institute, the CFA Designation, and the CFA Program.
c) All of the above.
The first choice is correct. Adams violated the Standard VII (A), as the CFA Program prohibits candidates from
disclosing confidential material gained during the exam process, which includes specific details of questions appearing
on the exam. The second choice is incorrect. Adams just stated the fact about the CFA Program and did not
exaggerate the meaning or implications of candidacy in the CFA Program. The third choice is incorrect.

Question 6
Charles Chaplane, who is not a member of CFA Institute, is a senior partner of a small brokerage firm, Blue Moon
Securities, which recently participated in a large stock offering. The offering company has been given an unfavorable
recommendation by his research department due to the company's poor performance. Chaplane immediately calls his
junior analyst John Blumenberg, CFA, and instructs him to upgrade his recommendation. Blumenberg comes up with
a more favorable recommendation within a short period of time. Blumenberg is least likely to have violated the
Standards because he failed to:
a) Avoid a conflict of interest.
b) Maintain independence and objectivity.
 c) Update his recommendation in a timely manner.
The best answer is the third option. The research was updated, although the change in recommendation resulted from
a conflict of interest and absence of independence and objectivity, which violated the Code and Standards.

Question 7
William Harris, a CFA candidate, is active in a blog that discusses CFA-related queries. He takes his exam and posts
the topics that were tested in the exam. He also mentions that he did really well on the exam. Which of the following is
most accurate?
a) William violated the standards by participating in a blog related to CFA.
b) William violated the standards by posting the topics tested in the exam.
c) William violated the standards by posting about how he did on his exams.
William violated Standard VII(A) by posting the topics that were tested in the exam. This is an act of leaking
confidential information about the exam.

Question 8
During an internal meeting, Jack O'Neil, CFA, who is the fund manager of the firm, had a disagreement with an
analyst on one of the stock picks. At the end, Jack stated that the analyst must listen to him because he is a CFA
charter holder and therefore knows better. Did Jack violate any of the CFA Institute Standards of Professional
Conduct according to the Standards of Practice Handbook?
a) No violation.
b) Yes, he violated the standard pertaining to Responsibilities as a CFA Institute Member.
c) Yes, he violated the Standard pertaining to Professionalism.
The first choice is incorrect. He violated Standard VII (B) regarding reference to CFA designation. The second choice
is correct. Under Standard VII (B), a member should not imply that superior performance can be expected from
someone with the CFA designation. The third choice is incorrect.

Question 9
Johnson McCall, CFA, makes stock recommendations to clients after taking into account the findings of a third-party
quantitatively based research service used by his firm. The firm he works for has performed due diligence to ensure
that the research is sound. Which of the following best describes McCall's position?
a) McCall is free to use the research.
b) McCall should not use third-party research when making recommendations; he can only use his own firm's
research.
c) McCall cannot use quantitatively based research, since it is often using selection criteria that may not be
understood in detail by the client.
McCall can rely on his firms' due diligence unless he has grounds for suspecting the validity or the process of the due
diligence. Using quantitative criteria to select stocks is acceptable as long as it is based on a sound process and the
general principles of how selections are made are communicated to the clients.

Question 10
Stella Bubsi and Larry Futura are candidates in the CFA Program. Bubsi has asked Futura about the specific details of
questions appearing on the exam. Futura has declined to provide specific details, but does give the broad topical
areas that were tested. Which of the following statements is most accurate?
a) Both Bubsi and Futura have violated the Standards.
b) Bubsi has violated the Standards but Futura has not.
c) Neither Bubsi nor Futura has violated the Standards.
Standard VII(A) prohibits members from disclosing and/or soliciting confidential material gained prior to or during the
exam and grading processes with those outside the CFA exam development process. Bubsi has solicited confidential
information, hence he has violated the Standard. Confidential exam information includes the broad topics that were
tested in an exam disclosed by Futura, hence he is in violation of the Standards.