PART A MULTIPLE CHOICE 17 MARKS Instructions: Please highlight ( $1,000,000 Taking a Big Bath refers to (1 mark): Something you do after working outside

PART A MULTIPLE CHOICE 17 MARKS

Instructions: Please highlight (<- like this) the option that corresponds to the correct answer. Select only one. Thank you.

1. Megan Lovrova, CFA, is an equity analyst focusing on the consumer-packaged goods industry. Megan has just returned from a China research trip where she was doing site visits of tea plantations as part of her stock due diligence process. Upon her return home, she delivers a report to her clients with a Buy recommendation of Guangxi Super Tea Limited (GST), along with tea samples she collected on her trip. GST is a thinly traded small cap company. When purchasing GST for her clients, Megan also buys the same shares for her own personal account. She had previously disclosed her plans to purchase the shares for her own account alongside her clients before she bought the shares. However, she was forced to sell the same shares several week later to pay for a family medical emergency. Megan received permission from her compliance department for both transactions. Megans investment actions violate CFA Institute Standards with respect to her:

(2 marks)

1. Disclosure to clients
2. Personal tea investments
3. Gifts of tea samples to clients
4. Selling the shares due to a medical emergency
5. None of the above

2. Oscar Chen, CFA, works for Fast Rabbit Capital Partners (FRC), a privately owned investment firm specializing in frontier market investing. Oscar meets Walter Bjork at a charity auction event. Walter is the owner and CIO of Li River Investment Management (LRIM), a rapidly growing investment firm that competes with FRC. Walter is impressed with Oscars research abilities and track record. Several weeks after the charity event, Walter reaches out to Oscar and asks if he would be interested in changing employers and building LRIMs new Saigon based research team. Oscar is excited about the opportunity and to show his worth to Walter, Oscar carries out the following actions at his office after normal working hours:

Action 1: He makes handwritten notes from previous FRC research meeting notes

Action 2: Makes copies of research reports he recently completed on Vietnamese stocks

Action 3: Creates a list of all the work he has completed at FRC on his personal computer

Which of Oscars actions are ok and consistent with the CFA Standards? (2 marks)

1. Action 1
2. Action 2
3. Action 3
4. None of the above
5. All of the above

3. Alice Nwankwo, CFA, is an equity research analyst. She appears on Blumbargs Market Round-up, a television program that discusses stocks and investment ideas. During her appearance on the show Alice shares that she no longer views Speedy Eats Inc. as a buy opportunity and believes a sell rating is more appropriate. This conclusion was based on poor company performance and senior management turnover at the company.

When Alice returns to her office, she is told by her supervisor that the CEO at Speedy Eats Inc. called to express his displeasure and anger regarding the negative remarks she made about his company during her TV appearance. Alice believes her deteriorating relationship with the CEO of Speedy Eats will make it more challenging to effectively cover companies in Paris, where the CEO has significant political and business influence. Alice wonders if she should revise her recommendation, ask permission of her supervisor to discontinue coverage of Paris based companies, or request another analyst be assigned to cover Paris region. Based on the CFA Standards, which is the least appropriate course of action for Nwankwo to take:

(2 marks)

1. Discontinue coverage
2. Upgrade recommendation
3. Transfer coverage to another analyst
4. None of the above
5. All of the above

4. Which of the following most likely determines unethical behavior? (1 mark)

1. External factors such as environmental or cultural elements
2. Intrinsic motivation
3. Lifestyle and character
4. None of the above

5. According to the CFA Institute, in the case of stock oversubscriptions, members will most likely breach their duty to clients by: (1 mark)

1. Prorating to all clients for whom the issue is appropriate
2. Avoiding odd-lot distributions
3. Not forgoing any sales to themselves
4. None of the above
5. A & B

6. From Parham Nasseris presentation to the class, specifically relating to average compensation of CFA Charterholders, how much is the average CFA Charterholder expected to make per year with 35+ years of professional experience? (1 mark)

1. $269,383
2. $515,136
3. $672,451
4. >$1,000,000

7. Taking a Big Bath refers to (1 mark):

1. Something you do after working outside on a hot day
2. Losing a lot of money at the casino
3. Making a large write-down or charge-offs to earnings
4. When an investment banker fails to close a merger transaction
5. An investor who has experienced a significant loss from an investment

8. Effective board structures include (1 mark):

1. CEO chairing the compensation committee
2. Ensuring that the CEO and Chair of the board are the same person
3. CFO chairing the audit committee
4. All board committees being comprised of independent persons
5. Making sure that directors are compensated at least as much as the CEO, as they are ultimately responsible for hiring and firing the CEO
6. A & C
7. All of the above

9. University endowments (1 mark):

1. Have all divested from fossil fuel related investments
2. Are under pressure from students and other stakeholders to support social causes
3. Do not take ESG into consideration
4. Are run by students and often have lackluster investment returns
5. All of the above
6. B & D

10. Good company management is especially important when (1 mark):

1. Your investment horizon and holding period are relatively short
2. Your company size is on the smaller side
3. Your company has high retained earnings
4. Management is making a lot of acquisitions
5. C & D
6. B, C & D
7. All of the above

11. Some ways investors use SASB Standards are (1 mark):

1. Reference SASB in their proxy voting guidelines
2. Outsource their ESG analysis to the SASB research team
3. Integrate SASB concepts into their investment due diligence process
4. B & C
5. A & C

12. Building a diverse and strong culture translates into (1 mark):

1. Higher productivity/efficiency
2. Lower employee turnover
3. Increased innovation
4. Attracting the best talent
5. All of the above

13. The FSB Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations are relevant to investors because they (1 mark):

1. Focus on information that is financially relevant to investment decision making
2. Improve investor understanding of risk, and therefore improve risk-return expectation formulation
3. Are supported by powerful environmental NGOs that can shame investors for not supporting climate action
4. All of the above
5. A & C
6. B & D

14. What should a suitability assessment consider? (1 mark)

1. Client investment experience and knowledge
2. Tax and estate considerations
3. Client age and spousal status
4. The weight and height of a client
5. If the client is willing to refer her friends
6. A, B, & C
7. B, C, & D
8. C, D, & E